Trump Cheers on Low Inflation Data as Clothing and Used Cars Prices Go Down

By Petr Svab

President Donald Trump delighted at the modest increase of consumer prices in April reported by the Bureau of Labor Statistics (BLS) on May 10.

“Great Consumer Price Index just out. Really good, very low inflation! We have a great chance to ‘really rock!’ Good numbers all around,” Trump said in a May 10 tweet.

Used car prices dropped by 1.3 percent, the most in seven months. Apparel prices decreased by 0.8 percent in April in the seasonally adjusted data and nearly 3 percent from April 2018 unadjusted. It was the largest 12-month drop in apparel prices since 2003, though the data is skewed by the change in March in how the BLS counts apparel prices.

The Consumer Price Index (CPI) increased 0.3 percent in April—less than expected—lifted by rising gasoline, rents, and healthcare costs. It increased 2.0 percent in the 12 months through April.

Economists polled by Reuters had forecast the CPI increasing 0.4 percent in April and rising 2.1 percent year-on-year.

The Federal Reserve last week kept interest rates unchanged and signaled little desire to adjust monetary policy anytime soon.

“We have a strong economy in a good place,” with no sign of inflation pressures, Federal Reserve Bank of New York President John Williams said at a local business event in New York City’s Bronx borough.

Interest rates, he said, are well positioned “to keep this going, to keep the economy on a strong trajectory.”

San Francisco Federal Reserve President John Williams visits "Opening Bell With Maria Bartiromo"
San Francisco Federal Reserve President John Williams visits “Opening Bell With Maria Bartiromo” on FOX Business Network at FOX Studios in New York City on Feb. 26, 2015. (Rob Kim/Getty Images)

In the 12 months through April, the core CPI increased 2.1 percent after gaining 2.0 percent in March.

Excluding the volatile food and energy components, the CPI edged up 0.1 percent as apparel prices dropped for a second straight month. The so-called core CPI has now increased by about the same margin for three straight months.

The Fed, which has a 2 percent inflation target, tracks a different measure, the core personal consumption expenditures (PCE) price index, for monetary policy.

The core PCE price index increased 1.6 percent on a year-on-year basis in March, the smallest rise in 14 months, after advancing 1.7 percent in February. The April PCE price index data will be published later this month.

Oil Impact

In April, gasoline prices rose 5.7 percent, accounting for more than two-thirds of the increase in the CPI last month, after surging 6.5 percent in March.

Gas prices responded to a nearly 40 percent hike in oil prices since the low in late December. The prices have somewhat slumped in recent weeks as Trump announced escalation of tariffs on Chinese products, but it usually takes about six weeks for oil prices to filter down to gas station prices.

A gas station in Miami,
A gas station in Miami, Florida, on April 9, 2018. (Joe Raedle/Getty Images)

While the China tariffs push the oil prices down, Trump’s decision to deny sanction waivers to buyers of Iranian oil has had the opposite effect.

“However, Saudi Arabia and several of its allies have more replacement barrels than what would be lost from Iranian exports in a worst case scenario. This should limit the positive impact on crude prices,” said Rystad Energy Head of Oil Market Research, Bjørnar Tonhaugen, MarineLink reported on April 25.

The economy grew at a 3.2 percent annualized rate in the first quarter, beating expectations, followed by the unemployment drop to 3.6 percent in April—the lowest since 1969.

Reuters contributed to this report.

From The Epoch Times