U.S. consumer prices increased less than expected in April, continuing a downward trend in inflation and raising hopes for a September interest rate cut. Retail sales were unexpectedly flat, indicating reduced consumer spending at online retailers and auto dealerships.
The consumer price index (CPI) rose 0.3% in April after a 0.4% increase in March and February, according to the Labor Department's Bureau of Labor Statistics (BLS). Shelter costs and gasoline prices, which together accounted for over 70% of the monthly CPI increase, rose by 0.4% and 2.8%, respectively. Food prices remained unchanged.
Year-over-year, the CPI increased by 3.4%, slightly down from 3.5% in March. The annual increase has dropped from a peak of 9.1% in June 2022. Core CPI, excluding food and energy, rose 0.3% in April, driven by persistent rent increases.
Retail sales were flat in April after a 0.6% rise in March. Consumers focused on essentials, with lower-income spending growth outpacing that of higher-income households. Core retail sales, which exclude certain categories, fell by 0.3%.
Economists expect inflation pressures to ease this quarter, with prices moving toward the Federal Reserve's 2% target. Financial markets see a 73% chance of a rate cut in September, up from 69% before the data release.
