The rate of increase in the Consumer Price Index fell in April to leave the headline national inflation rate at 8.3 percent, but the inflation rate for the South was higher than the national rate at 8.8 percent.
The main reason why the rate of inflation fell was a decline in gasoline prices of 6.1 percent in April. However, gas prices have been rising again in May and so the inflation rate is likely to increase again.
Of growing concern for inflation is food prices, especially wheat. The war in Ukraine has pushed wheat prices up 53 percent since the beginning of the year, as wheat exports from Ukraine have largely stopped. This supply shortage is exasperated by the heatwave in India and rains in China.
Rising wheat prices will increase the costs of basic foods such as cereals and bread. Cereal and bakery products are up 4.8 percent since the beginning of the year in the South.
Rising costs were cited by Walmart and Target recently as reasons for worse-than-expected earnings. Walmart specifically mentioned higher food and fuel costs. Target noted fewer sales of big-ticket items such as TVs, furniture, and appliances. Maybe, after two years, consumers have all the new home products they need.
Overall, retail spending remains strong (see Gary Kauffman’s report last week). However, retail employment in the Augusta MSA has softened a little since the New Year. Employment in January was a record 29,730 but this slipped to 29,525 in March.
Walmart also mentioned some overstaffing in its stores, so the pandemic retail boom may be coming to an end.