For the first time in three years, Americans’ wages are no longer outpacing inflation.
Prices rose 0.6% on a monthly basis, driving the annual rate to 3.8%, the highest since May 2023, according to the latest Consumer Price Index data released Tuesday by the Bureau of Labor Statistics.
Economists had expected prices to rise 0.6% from March and for the annual rate to climb to 3.7%.
Prior to the late-February US-Israeli strikes on Iran, inflation had eased to 2.4%. It leaped higher in March, and now, the energy price shock from the Iran war is further compounding longstanding affordability concerns for Americans weighed down by years of fast-rising prices.
“For consumers, that means the cost of living remains uncomfortable,” economist Sung Won Sohn, a finance and economics professor at Loyola Marymount University, wrote in a note Tuesday. “For the Federal Reserve, it means rate cuts are likely to be pushed in the future.”
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Pricier produce, fuel and electricity
The post-pandemic inflationary burst, when the annual pace of price hikes hit a four-decade high of 9.1% in the summer of 2022, drastically lifted all manner of prices. However, in recent years as inflation slowed, at least some Americans were able to get a leg up as their pay was rising faster than inflation.
That changed last month: Annual inflation-adjusted average hourly wage growth went negative for the first time since April 2023.
Paychecks grew 3.6% from April of last year, on average; prices rose 3.8%.
“Consumers were already under pressure; we’ve seen a softening in the labor market,” Augustine Faucher, senior vice president and chief economist at the PNC Financial Services Group, told CNN.
This unwelcome milestone arrives as Americans are contending with an energy price shock that’s rippling through the economy, making commonly purchased items even more expensi
Plus, it’s not just oil: A choked-off Strait of Hormuz has interrupted a flow of other critical materials, including fertilizers, aluminum and helium.
As it stands now, the higher prices are hitting consumers in some of the most visible of places: the gas station, the grocery store and their electric bills.
Gas prices didn’t rise as fast as they did in March (when they shot up by a record 21.2%); however, the 5.4% increase in April was the second-fastest seen since the latter part of 2023.
Electricity prices – moved higher last year because of factors such as demand for data centers, weather and infrastructure costs – now face additional pressures from the global oil and gas shock. In April, prices for electricity rose 2.1%, the fastest monthly increase in more than four years.
Overall food prices rose 0.5% (grocery items were up 0.7%) last month and are up a respective 3.2% and 3.6% from the year before.
Meat prices, particularly beef, continued to climb, but so did produce.
Prices of fresh fruits and vegetables, which are often transported by refrigerated diesel trucks, rose by 2.3%, the highest monthly increase for that category since 2010, BLS data shows.
Tomato prices soared by more than 15% for the second month in a row.
“The war has come home, and Americans can feel it and see it in their grocery basket,” Joe Brusuelas, RSM US chief economist, told CNN.
An uncomfortable place for households — and the Fed
While rising energy prices accounted for 40% of April’s monthly inflation gain, another contributing factor were higher housing-related price hikes (categorized by the BLS as “shelter”), which were boosted by a one-time adjustment related to last year’s historic government shutdown.
