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Truflation: US Inflation Update April 2024

Truflation

May 13, 2024 • 2 min read

Recent inflation trends

The last mile of inflation will test the Federal Reserve to the limit. Slower disinflation and approaching elections are potentially a dangerous combination.

The Fed's task is harder than it looks on the surface. Its goal is to restrain demand enough to push inflation gently back to its 2% target without tipping the economy into a recession. This has been working well up until the last couple of months, but progress has stalled lately and recent data suggests it will take longer than expected to bring inflation under the 2% target.

Read the Entire April 2024 Inflation Update HERE

The year-over-year (YoY) inflation, as reported by the BLS, rose to 3.2% in February and again to 3.5% in March. In addition, the closely watched core prices, which exclude volatile food and energy, have increased for three months in a row.

Meanwhile, several key economic indicators point to the ongoing strength of the US consumer. In March, retail sales surged 0.7%, suggesting that, with jobs remaining plentiful, consumers are largely unfazed by higher prices. This growth in sales came in much hotter than expected, underscoring the resilience of shoppers. In fact, March's retail sales increase was almost double what was expected, following another 0.7% rise in February. Even taking out gas prices, which have been on the rise, retail sales still rose by a solid 0.6%.

Disposable Personal Income increased 0.5% in March after a 0.3% gain in February. This was also boosted by the continued strength in the labor market and fueled personal spending growth to 0.8% MoM in March on top of a 0.7% rise in February.

However, consumers have been saving less and seem to be tapping into their savings: the savings rate fell to a 16-month low of 3.2% in March from 3.6% in February. Perhaps the low savings rate reflects their strong balance sheets, with low debt-to-income ratios driven by baby boomers and by household net worths rising alongside equity price increases and elevated house prices.

Read the Entire April 2024 Inflation Update HERE

Chart 1 – US Personal Consumption

Truflation: US Inflation Update ApRecent inflation trends The last mile of inflation will test the Federal Reserve to the limit. Slower disinflation and approaching elections are potentially a dangerous combination. The Fed's task is harder than it looks on the surface. Its goal is to restrain demand enough to push inflation gently back to its 2% target without tipping the economy into a recession. This has been working well up until the last couple of months, but progress has stalled lately and recent data suggests it will take longer than expected to bring inflation under the 2% target. The year-over-year (YoY) inflation, as reported by the BLS, rose to 3.2% in February and again to 3.5% in March. In addition, the closely watched core prices, which exclude volatile food and energy, have increased for three months in a row. Meanwhile, several key economic indicators point to the ongoing strength of the US consumer. In March, retail sales surged 0.7%, suggesting that, with jobs remaining plentiful, consumers are largely unfazed by higher prices. This growth in sales came in much hotter than expected, underscoring the resilience of shoppers. In fact, March's retail sales increase was almost double what was expected, following another 0.7% rise in February. Even taking out gas prices, which have been on the rise, retail sales still rose by a solid 0.6%. Disposable Personal Income increased 0.5% in March after a 0.3% gain in February. This was also boosted by the continued strength in the labor market and fuelled personal spending growth to 0.8% MoM in March on top of a 0.7% rise in February. However, consumers have been saving less and seem to be tapping into their savings: the savings rate fell to a 16-month low of 3.2% in March from 3.6% in February. Perhaps the low savings rate reflects their strong balance sheets, with low debt-to-income ratios driven by baby boomers and bTruflation: US Inflation Update April 2024

Source: Bureau of Economic Analysis, Personal Income and Outlay Report

Recent inflation trends

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