Consumer prices rise in April, but at slower pace

May 16, 2017

Keywords: Valuations

After an unusual dip in March, breaking up a string of 13 straight increases, consumer prices got back to their advancing ways in April, rising both on a monthly and annual basis, newly released government numbers confirm.

The Consumer Price Index, which tracks what the typical buyer spends on products and services, rose roughly 0.2 percent in April compared to the previous month, the U.S. Department of Labor reported. Prices also increased on a year-over-year basis, up 2.2 percent from 12 months prior, though slower than previous periods, like February, when the measure grew by an annual rate of roughly 2.8 percent.

The monthly rate increase was in line with what economists surveyed by MarketWatch anticipated, as the consensus was 0.2 percent.

Also logging an increase were core prices, which excludes food and energy in the analysis because the respective measures are subject to fluctuation. Though core valuations did rise, it was at a much slighter extent, up 0.1 percent versus the previous month, the Labor Department said. 

Will the Fed still raise rates?
Economists interviewed by The Wall Street Journal indicated that this weakness will no doubt be taken under advisement by the Federal Reserve, which has been bullish about its plans to raise short-term interest rates soon because of inflation steadily moving to 2 percent and improved employment conditions, with the jobless rate tumbling to its lowest ebb in a decade in April. This most recent core prices reading might lead to some hesitation about whether raising rates in June is warranted, but won't be the difference maker in deciding against, experts maintain.

Loretta Mester, president of the Federal Reserve Bank of Cleveland, told the Journal that based on market conditions, achieving 2 percent inflation seems to be only a matter of time.

"I believe the conditions are in place for a sustained return over the next year or so to our symmetric goal of 2 percent inflation," Mester said.

Inflation has gained momentum as of late. In the previous 12 months, inflation rose by roughly 2.2 percent, the Associated Press reported.

PPI leaps to five-year high
Meanwhile, producer prices are gaining ground, which economists point to as a more reliable indicator of inflationary movement. The measure rose 2.5 percent in April compared to the same period last year, the Labor Department reported, marking the largest increase since February 2012. Import prices made an even bigger leap, accelerating by around 4.1 percent from 12 months earlier.

How have the economy's machinations affected investors on Wall Street? For the most part, they haven't swayed their sentiment one way or the other. Indeed, 37 percent of respondents in the most recent American Association of Individual Investors said they don't expect stock prices to change much at all over the next six months. That's up 31 percent from the previous survey and well above the historical average, which is also 31 percent. Bullish sentiment retreated to 32.7 percent and bearish down to 30.2 percent, off 5.3 percent and 0.3 percent, respectively, from the prior survey.

Economic indicators give investors a glimpse into how markets are performing, but they can be difficult to draw meaning from, even for seasoned traders. Miles Capital has the experience and investment consulting chops that are a cut above the rest. Learn more about our insights here.

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