A decline in fuel prices was responsible for a slight decline in overall US inflation during April, though persistent supply-side disruptions still kept inflation near its highest level in 40 years.
The closely watched Consumer Price Index (CPI) report, published on Wednesday, showed the annual rate of inflation slowing for the first time since August. The headline annual rate came in at 8.3 per cent, down from 8.5 per cent in March, but more than the 8.1 per cent economists expected.
The so-called core inflation rate, that excludes food and energy prices, slowed to 6.2 per cent in April from 6.5 per cent in March, although this was expected to decelerate to six per cent.
On a month-over-month basis, the broadest measure of CPI increased by 0.3 per cent, compared to March’s 1.2 per cent surge, but defied expectations of a 0.2 per cent print. Broadly, the report offered little evidence that US inflation is cooling.
In the meantime, inflation in Germany, Europe’s largest economy, hit a new multi-decade high in April, pushed higher by food and energy prices, according to figures published by the Federal Statistical Office (Destatis) on Wednesday. Consumer prices are now 7.4 per cent higher than in the same month last year, Destatis said. The April rate was higher than the 7.3 per cent reported in March. The last time prices rose at a faster pace was for West Germany in the second half of 1981 – nine years before the German reunification – as the Iran-Iraq War caused oil prices to soar.
Finally, the UK economy unexpectedly shrank in March as households cut back spending and the cost of living rose to levels last seen in the 1950s. The economy grew by 0.8 per cent during the first three months of the year but shrank by 0.1 per cent in March. The quarter’s growth is slower than the 1.3 per cent increase in output seen in the fourth quarter of last year and economists’ forecast of one per cent growth in output.
The latest economic growth figures cast doubt on the Bank of England’s ability to keep hiking interest rates and pile pressure on the government to respond with measures to support growth, although the focus seems to be on controlling inflation.
This report was compiled by Bank of Valletta for general information purposes only.