Inflation Slows, but Consumers Still Grapple With High Cost of Everyday Essentials

The headlines show that inflation may be cooling, but for consumers bearing the brunt of sticker shock, the damage may have already been done.

As reported Wednesday (April 12), the Consumer Price Index (CPI) rose 0.1 percent in March on a seasonally adjusted basis, as measured month over month, after increasing 0.4% in February, the U.S. Bureau of Labor Statistics reported. The 12-month reading is now at 5%, the lowest level in roughly two years.

We’re a far cry from the 9.1% CPI reading from June of last year. But drilling down into the data, some of the key essentials of life — clothing, shelter and food — remain expensive, where inflation is pushing prices higher, or at best, prices are steady, off of already elevated levels.

Food, Shelter and the Clothes on Our Backs

By way of example: Prices for food consumed at home (which would include groceries) slipped 0.3% in the most recent reading. But as measured through the past 12 months, prices were up 8.4% — as the index for cereals and bakery products rose 13.6% over the 12 months ending in March. The report details that the “remaining major grocery store food groups” posted increases ranging from 2.5% (for fruits and vegetables) to 11.3% (non-alcoholic beverages).

For food consumed away from home, inflation has been entrenched at a monthly 0.6% rate.

Apparel — the very clothes on our backs —was up 0.3% month on month, and is up 3.3% through the trailing 12 months. Shelter, a respective 0.6% and 8.2%.

There are of course some puts and takes. Gas is 17.6% cheaper than it was a year ago, fuel oil is 14.2% less expensive.

But the pressure’s still on, as the numbers above show. And as PYMNTS reported in recent coverage, average hourly earnings were up 4.2% in March from a year ago, which means that overall inflation is outpacing take-home pay.

At this writing, markets are cheering the inflation data, and the hope is that the slowdown in inflation’s heady pace will spur the Fed to pause its campaign of boosting interest rates.

But consumers, we note, are unlikely to be moved by Wednesday’s CPI report to suddenly amp up their spending. Our latest report on consumer sentiment regarding inflation shows that households expect inflation to last well into 2024. As many as 74% of consumers have cut back on nonessential retail purchases, while 70% of grocery shoppers and 67% of retail customers expect significant price increases in the next 12 months. For the merchants in those verticals, there seem to be some top line pressures in the offing. Nearly half of grocery and retail shoppers would leave their favorite brand for a less expensive competitor.

The government’s data signal that inflation’s pullback might be in sight. But for those of us opening our wallets each and every day and finding less to go around, it will be a while before any relief is felt.