May 15, 2007 (Prices Byte)
Food and Energy Prices Cause High Inflation in April
Prices Byte by Dean Baker
For Immediate Release: May 15, 2007
Contact: Lynn Erskine, 202-293-5380 x115
Wage growth is lagging far behind inflation.
A 0.4 percent rise in food prices, coupled with a 2.4 percent jump in
energy prices, pushed the CPI up by 0.4 percent in April. This brings
the annual rate of increase over the last three months to 5.7 percent,
approximately 2 percentage points above the rate of wage growth over
this period. The core inflation rate was just 0.2 percent, held down by
falling apparel prices and slower rental inflation. The core inflation
rate for the last three months has been just 1.9 percent, down slightly
from its 2.3 percent rate over the last year.
Most of the anomalies in this month’s report were on the low side.
Apparel prices fell 0.3 percent after dropping 1.0 percent in March.
Apparel prices have dropped at a 3.3 percent annual rate over the last
three months. The public transportation index, which accounts for 1.4
percent of the core index, fell by 0.4 percent, driven by a 0.9 percent
drop in airfares. This will almost certainly be reversed in future
months, as airlines pass on higher fuel costs. The household furnishing
and operations index, which accounts for 6.0 percent of the core CPI,
fell by 0.4 percent in April. Tobacco products also posted an unusual
0.4 percent decline in April.
The only obvious aberration on the high side was a
1.9 percent jump in hotel prices. This largely reversed a 2.3 percent
decline reported in March.