Consumer Inflation Edges Down in April

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Consumer prices declined a tad in April, but are trending up significantly year-over-year. The Consumer Price Index increased by 0.4% last month, according to the Bureau of Labor Statistics. That's slightly less than the 0.5% increase seen in February and March. At this point, inflation appears to be steady at higher levels than what was seen last year, but that means the 12-month change in prices is rising.

First, here's how CPI has moved each month since the recession began in late 2007:

cpi 2011-04 v2.png

During the worst parts of the recession, inflation was very low, even negative. But in 2011, we're seeing inflation tick up, due in part to the Federal Reserve's efforts to nudge it upward.

Of course, the other big reason for higher inflation has been rising food and energy prices. In April, energy prices rose 2.2%, while food prices increased by 0.4%. So energy was the real driver. If you take food and energy out of the equation, core CPI looks a little tamer at 0.2%:

cpi 2011-04 core.png

At no point over this period has core CPI been higher than 0.3% per month. In 2011, it has been a little higher than in 2010, but only a little, generally around 0.2%.

These monthly increases of CPI and core CPI still look pretty small, but they add up. If you look at the longer-term picture, then you can see inflation having recently risen significantly. Here's the 12-month chart from BLS:

cpi 2011-04 12m bls.png

That's quite a steep climb for CPI. It shows that broad inflation has risen by 3.2% over the past 12 months. As recently as November, the 12-month change was just 1.1%. Core CPI, however, still looks pretty low, at just 1.3% in April. That's just a bit higher than levels from late 2010.

At this point, there's no question that we're seeing more inflation. But most of that is due to the increase in food and energy prices. If they calm in coming months, so should the rate of inflation. Even then, however, we're looking at a somewhat higher longer-term trend than we saw late last year. Of course, that's exactly what the Fed was aiming for when it began its latest dose of monetary stimulus last November.

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Daniel Indiviglio was an associate editor at The Atlantic from 2009 through 2011. He is now the Washington, D.C.-based columnist for Reuters Breakingviews. He is also a 2011 Robert Novak Journalism Fellow through the Phillips Foundation. More

Indiviglio has also written for Forbes. Prior to becoming a journalist, he spent several years working as an investment banker and a consultant.
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