Consumers Pay More In April

Consumer prices rose in April by a modest amount, if you don't count food and gasoline. But what consumer gets to exclude those items from their monthly budget?

The U.S. Labor Department's Consumer Price Index (CPI) rose 0.4 percent last month, but only 0.2 percent when food and energy are excluded. The CPI separates food and energy costs from the “core” inflation rate because they tend to be volatile on a month to month basis, and can make forecasting more difficult.

Rising gas prices

But for consumers, energy and food prices are part of reality. Gasoline prices were up 3.3 percent in April. They're up more than 33 percent in the last 12 months.

Food prices, however, rose much more slowly. The CPI show food costs rose 0.4 percent in April. The price of fresh vegetables went down with the cost of dairy, meat, fish and eggs going up.

The price of both new and used cars was higher in April, along with the cost of medical care and clothing.

Inflation understated?

Economist Joel Naroff of Naroff Economic Advisors, in Holland, Pa., believes the government's inflation gauge seriously under-estimates the costs consumers are facing.

“When I give talks, I always start with the question, 'who thinks the recession is over?'” Naroff said. “Few say yes and they look at me like I am crazy when I tell them it ended nearly two years ago. I get similar comments when I discuss inflation.”

Naroff said the government's contention that rising prices are mostly limited to food and energy doesn't fly with the audiences he addresses.

“People feel every price is rising and when I tell them the increase in consumer costs is largely limited to food and energy, they laugh,” he said.

While prices have been going up, real wages have not, and Naroff said that factor makes inflation seem worse than it is for many consumers. Inflation adjusted average hourly wages were down again in April and have fallen by 1.5 percent over the year.

“If you wonder why the average person is so ticked off, that is the reason,” Naroff said.