Inflation on consumer goods increased 0.6% in April, down from 0.9% in March. While month-over-month inflation was lower, year-over-year inflation rose to 3.8% in April from 3.3% in March, largely driven by the conflict in Iran. Starting with energy, price hikes have spread across the economy. This month, we saw elevated grocery prices (+0.5%), housing costs (0.6%), and gasoline (5.4%).
Gasoline particularly stands out because, while we normally see higher gas prices in the summer, this is the third consecutive month of sharply higher gas prices. At this time last year, February, March, and April saw gasoline prices lowering. The U.S. economy may still be going strong, but the Iranian conflict continues to affect the prices of everyday goods.
As inflation continues to rise, average hourly earnings struggle to keep pace. Real average hourly earnings decreased 0.5% in April, an improvement from the 0.6% decrease in March, but still not keeping up with rising inflation. Average hourly earnings are $37.41, up from $36.12 a year ago. Before the conflict, in February, real wages increased 1.2% over the last year.
In the last year, the Trump administration has made significant progress towards improving affordability for Americans, from the Working Families Tax Cuts to gas prices hitting four-year lows due to increased energy production. However, much of the progress in affordability is being erased by foreign conflict.
Although employment continues to exceed expectations, inflation hits families hard when prices are already high. The continued increases contribute to consumer sentiment hitting all-time lows, as it’s hard for Americans to see the strength of the U.S. economy when they take a pay cut each time inflation outpaces wage increases.
One thing that continues to provide relief for families during this time is the Working Families Tax Cuts (also known as the One Big, Beautiful Bill). With lower tax payments on tax day and the largest tax refunds hitting bank accounts, Americans have more of a cushion against inflation than they otherwise would. While conservatives had a big win in tax policy, they must maintain the momentum in other areas. From deregulation in the housing market to price transparency in health care to protection for independent contractors, the Trump administration has worked with allies in Congress on many areas where policy can make a big impact on affordability. The momentum cannot stop with lowering gas prices; it must continue to all areas, from energy abundance to housing.
Now more than ever, affordability is top priority for many Americans. Deregulation in many areas can help increase access to affordable options for families. In housing, tax reforms to increase the capital gains exclusion limit, as well as decreasing regulations in the permitting process and zoning, will allow more families to buy family-sized homes. In energy, allowing new energy infrastructure to be approved more quickly gives Americans better access to low-cost energy. In child care, this means eliminating burdensome regulations that increase costs without affecting child safety.
There are many avenues for affordability across the policy spectrum, and with inflation rising faster than wages, the Trump administration must continue to act on behalf of Americans by increasing access to affordable options.