However, the puts and takes indicated that key spending categories, such as shelter, are still more expensive, and grocery prices declined a bit, driven by lower egg prices that have only partly retreated from all-time highs.
The read-across is that the basics of daily life are still pinching consumers in the United States, and the full impact of tariffs that escalated through the last month may not be showing up in the data yet.
The headline number remains above the Federal Reserve’s 2% target, and the long-term inflation rate dating back to the middle of the last decade is also above that target level — a nod to how hard it is to get prices down once they go up.
One category where there might be some pullback in spending is food consumed away from home, which has seen consistent month-over-month increases of 0.4%, and where inflation tied to dining out is 3.9% higher than it was a year ago — one of the highest annualized paces among all categories tracked. The index for full-service meals rose 4.3%, and the index for limited-service meals increased 3.4%.
A Deceleration, but for How Long?
The overall index rose 0.2% on a seasonally adjusted basis in April, which etched the trailing 12-month inflation rate at 2.3%. The latest data extended a downward trend since the beginning of the year, recording 3% in January, 2.8% in February and 2.4% in March.
Egg prices have seemingly become the de facto standard for grocery prices, and they were down 12.7% but are still 49% higher than last year. As a result, food at home, as a category, was down 0.4%, but the 12-month inflation rate was 2%.
The overall tone of the report may indicate a slight muting of inflation, but it must be noted that the key conduit to at least maintaining spending over the next few months is lagging.
The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) rose by 2.1% over the past year, the lowest year-over-year change since February 2021. On a monthly basis, the index increased by 0.3% before seasonal adjustment. When wages trail price increases, there are only a few levers that can be pulled. Consumers can pull back on spending, or they can use credit to fill the gaps.
The CPI data from April may prove scant comfort to consumers. More than 45% of all goods consumed in the U.S. are imported and subject to tariffs, according to PYMNTS Intelligence calculations based on 2024 data from the Bureau of Economic Analysis and the U.S. Census Bureau. That puts nearly half of the consumer goods economy at risk for price increases beyond the muted April reading.
In the meantime, separate PYMNTS Intelligence data indicated that credit, and buy now, pay later (BNPL) offerings, are being used to plug the gap that’s tied to cash flow shortages when income growth lags outlays. Consumers facing cash flow shortages are more than twice as likely to use credit out of necessity. Specifically, 38% of consumers who frequently encounter cash flow shortages reported using credit out of necessity, compared to 14% of financially stable individuals.
