The depreciation of money to buy products is one of the main effects of inflation and this Friday the Department of Commerce announced that the basic price index of personal consumption expenditures increased 3.1% faster than expected in April as price pressures mounted on the US economy.
The expected forecast was for it to rise 2.9% after the 1.9% increase registered in March. The Federal Reserve considers the measure to be the best indicator of inflation and estimates that 2% is healthy, although it has promised to allow the level to be higher than usual in the interest of promoting employment.
The index records the variation in prices of goods and services and is considered a more far-reaching inflation measure, because it captures changes in consumer behavior and has a broader scope than the Consumer Price Index of the Department of Labor. The CPI was published in the middle of this month and registered an increase in April of 4.2%.
Over the past month, the core personal consumer price index rose 0.7%, when the forecast was 0.6%. Including volatile food and energy prices, the general personal consumption price index rose 3.6% year-on-year and 0.6% from March, the largest increase in a month since November 2007.
Jefferies chief economist Aneta Markowska noted that inflationary pressures could worsen before improving, noting that declining retail inventories could drive prices higher. He added that a transition in consumer spending from goods to services should ultimately reduce inflationary pressures.
Gus Faucher, chief economist at PNC Financial, commented that while inflation figures for April beat expectations, much of the increase was related to supply chain bottlenecks in areas such as computer chips and automobiles.
We have some temporary inflationary pressures, ”Faucher explained, “But those will fade, so there is nothing for the Federal Reserve to worry about.”
Chairman Jerome Powell and other Fed officials have repeatedly said they believe the inflation spikes that have emerged with some products will be temporary as bottleneck supply chains are uncovered.
For her part, the Secretary of the Treasury, Janet Yellen pointed out to a House committee that the economy could withstand a “bumpy” period with high inflation until the end of the year..
With information from CNBC
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