AIER’s monthly Everyday Price Index rose 0.6 percent in April led by price increases at grocery stores and gas stations. The EPI measures price changes that people see in everyday purchases such as groceries, gasoline, utilities, and personal-care products. It excludes prices of infrequently purchased, big-ticket items (such as cars, appliances, and furniture) and prices that are contractually fixed for prolonged periods (such as housing). Over the past 12 months the EPI increased 2.2 percent.
Prices at the grocery store increased 0.2 percent in April. Fresh fruits and vegetables led grocery store prices higher. Prices for fresh fruits and vegetables rose 1.8 percent in April. Prices at the grocery store have risen the last four months. A recent pickup in real consumer spending at grocery stores has supported prices. Looking back over the past year, prices at the grocery store have fallen 0.8 percent, much lower than its historical growth rate. Prices at the grocery store have risen by an average of 2 percent each year over the last 15 years.
Restaurant prices also rose 0.2 percent in April. Casual-restaurant prices rose faster than full-service restaurant prices. Casual-restaurant prices increased 0.3 percent in April, while full-service restaurant prices rose 0.2 percent. Over the past year, restaurant prices have increased 2.5 percent. Restaurant prices have been rising in line with their historical growth rate of 2.8 percent seen over the last 15 years. Solid consumer demand should continue to support restaurant prices. According to the Restaurant Performance Index from the National Restaurant Association, restaurant owners remain generally optimistic about the outlook for business conditions.
In April, gasoline prices increased 4 percent. Gasoline prices increased across all grades with regular increasing 4.2 percent, midgrade increasing 3 percent, and premium increasing 2.8 percent. Over the past year, gasoline prices have jumped 14.4 percent. An increase in domestic crude oil production may curb rising gasoline prices. Crude oil production has rebounded from 8.6 million barrels per day last autumn to 9.1 million barrels per day in April.
The more widely known price gauge, the Consumer Price Index (reported by the Bureau of Labor Statistics), increased 0.3 percent on a seasonally unadjusted basis in April and increased 2.2 percent over the past 12 months. The CPI is being led higher by energy prices and prices for core services. Core services include shelter, medical care, and education. Overall, the United States does not appear to be experiencing broad-based price pressures but pockets of concentrated price increases.
Broad-based price pressure may increase if excess bank reserves held at the Federal Reserve are loaned out. The monetary base surged coming out of the Great Recession. The monetary base includes currency in circulation and excess bank reserves. Excess reserves held at the Federal Reserve have risen to an unprecedented $2 trillion. The environment for loan growth is positive. Household balance sheets are healthy, and the labor market is solid. This should support continued growth in private debt. Inflationary pressure may increase if excess reserves are loaned out to consumers and businesses.