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Behind the Numbers: PCE Inflation Update, April 2022

This update, prepared by Dallas Fed Senior Economist Jim Dolmas, provides an in-depth analysis of the latest personal consumption expenditures (PCE) inflation data. NOTE: Terms in bold are defined in the Inflation Update Glossary.

The headline, or all-items, PCE price index rose an annualized 3.0 percent in April after increasing an annualized 11.3 percent in March. The price index for PCE excluding food and energy rose at a 4.2 percent annualized rate after increasing an annualized 4.0 percent a month earlier. Energy prices declined, led by a drop in the price index for gasoline and other motor fuel. Food prices rose sharply.

The Dallas Fed’s Trimmed Mean PCE inflation rate was an annualized 3.0 percent in April, identical to its rate in March.

Over the six months ending in April, the trimmed mean averaged an annualized 4.2 percent rate of increase. Over the same period, the headline and core indexes averaged annualized rates of 6.7 percent and 4.9 percent, respectively.

The 12-month trimmed mean inflation rate was 3.8 percent in April, up from 3.7 percent in March. The 12-month inflation rate for headline PCE was 6.3 percent, down from 6.6 percent in March, while the 12-month inflation rate for PCE excluding food and energy was 4.9 percent, versus 5.2 percent a month earlier.

Gasoline Prices Fall

The price index for gasoline and other motor fuel fell a seasonally adjusted 5.8 percent in April after rising 18.3 percent in March. Prices for the other major energy components rose, with the price indexes for fuel oil, electricity and natural gas up 2.7 percent, 0.7 percent and 3.1 percent, respectively. The price index for energy goods and services as a whole fell 2.8 percent in April after rising 11.7 percent in March.

The price index for gasoline was up 41.7 percent for the 12 months ending in April; it had been up 48.4 percent for the 12 months ending in March. Compared with April 2021, the price index for fuel oil was up 80.5 percent, while the price indexes for electricity and natural gas were up 10.6 percent and 22.3 percent, respectively. The price index for energy goods and services as a whole was up 30.4 percent over the 12 months.

After April’s decline, the price index for gasoline is likely to show an increase when PCE data for May are released. Weekly retail price data from the Department of Energy (DOE) show gasoline prices on track for a roughly 6.8 percent increase in May before seasonal adjustment. The typical seasonal pattern for May—what we would expect given normal changes in supply-and-demand conditions—amounts to a roughly 3.6 percent price increase, making the DOE data consistent with a 3.2 percent increase in the seasonally adjusted gasoline price index. An increase of that magnitude would contribute about 1.1 annualized percentage points to May’s headline inflation rate.

Food Prices Up Sharply Again

The price index for food and beverages purchased for off-premises consumption rose at a 13.3 percent annualized rate in April after increasing at a 17.7 percent rate in March. The increase in the aggregate reflects large increases in the prices of both less-processed food items (up an annualized 14.9 percent) and more-processed food items (up an annualized 12.6 percent).

The price index for food as a whole was up 10.0 percent over the 12 months ending in April. The 12-month increase in the aggregate reflects a 13.1 percent rise in the prices of less-processed items and an 8.8 percent increase in the prices of more-processed items.

Core Goods, Services Prices Climb

Prices for core goods rose an annualized 1.1 percent in April after increasing an annualized 0.7 percent in March.

Among core goods, the price index for women’s and girls’ clothing (down an annualized 10.2 percent) had the largest negative impact, subtracting about 0.2 annualized percentage points from April’s core rate. At the other end of the spectrum, the price index for new light trucks (up an annualized 11.1 percent) had the largest positive impact, contributing about 0.2 annualized percentage points to April’s core rate.

For the 12 months ending in April, prices for core goods were up 6.3 percent, compared with a 7.5 percent increase for the 12 months ending in March.

Prices for core services, meanwhile, rose an annualized 5.4 percent in April after increasing an annualized 5.3 percent in March. Among components experiencing outsized changes, the price index for spectator sports (down an annualized 64.3 percent) had the biggest negative impact on ex-food-and-energy inflation, subtracting around 0.3 annualized percentage points from April’s core rate. The price index for air transportation (up an annualized 162.2 percent) had the largest positive impact, contributing about 0.9 annualized percentage points to April’s core rate.

Our “big three” price index—aggregating three of the largest and least-volatile components of core services: rent, owners’ equivalent rent (OER) and the price of dining out—rose at a 6.3 percent annualized rate in April, compared with a 4.7 percent rate in March. Individually, the annualized increases were 6.9 percent for rent, 5.6 percent for OER and 7.3 percent for dining out (more formally, “other purchased meals”).

For the 12 months through April, the big three index was up 5.5 percent, compared with a 5.3 percent increase for the 12 months through March. The price index for core services as a whole rose 4.4 percent for the 12 months ending in April, compared with a 4.3 percent increase for the 12 months through March.