Are diminished energy prices to thank for reduced inflation rates in the U.S. economy?
White House press secretary Karoline Leavitt credited “declining” energy prices for bringing down overall inflation in a Monday press briefing, citing the Bureau of Labor Statistics (BLS) consumer price index report for April, released on May 13. “I would again point you to the inflation report that came out last week,” she told reporters, “showing that inflation is declining in large part because energy prices are dropping across the board in this country because of the president’s robust energy agenda that he has undertaken since January 20.”
President Donald Trump similarly credited decreasing energy prices for contributing to what he claimed was “no inflation” reported in the BLS release. “No Inflation, and Prices of Gasoline, Energy, Groceries, and practically everything else, are DOWN!!!” the president posted to social media on May 13, hours after the BLS inflation report was published.
Leavitt’s statement that inflation is declining due to lower energy prices is doubly wrong: Inflation is not declining and energy prices are not “dropping across the board.” While Trump is correct that gasoline prices are down, his other claims that there is “no inflation” and that energy prices are down are untrue.
The consumer price index (CPI)—a widely used inflation metric that tracks prices for a basket of select goods and services—increased 0.2 percent in April over the previous month, and 2.3 percent since April 2024. This is not indicative of “no inflation,” as Trump claimed. The CPI has increased in both the last month and year. While the annual inflation rate—the rate of change in CPI in the last year—has decreased in three straight months, that does not mean that inflation is declining. It means that prices are still on average rising, but that price increases in recent months have become smaller.
One major error underlies both Leavitt’s and Trump’s comments: Energy prices increased last month. CPI in the energy sector increased 0.7 percent month-over-month in April. While energy prices are lower than in April 2024, deflating 3.7 percent over the year, they did not contribute to lower inflation last month. Indeed, inflation in the energy sector outpaced inflation for all items—0.7 percent to 0.2 percent, respectively—per April’s CPI report.
Some subcategories of the energy sector did experience deflation in April. Most notably, prices for gasoline and fuel oil dropped by 0.1 percent and 1.3 percent, respectively, from the month prior. But falling prices in those subsectors in April were offset by inflation in the energy services sector, primarily electricity and natural gas services. Electricity prices have increased by 0.8 percent since March, while prices for utility (piped) gas services—natural gas provided by utility services—have spiked 3.7 percent.
Why have the costs for electricity and natural gas services—which have jumped by 3.6 percent and 15.7 percent, respectively, since April 2024—gone up? Rising demand is a primary factor. “Demand growth for electricity is real,” Larry Coben, CEO of the Texas-based energy company NRG Energy, told CNBC on May 12. “I’ve been in the business [for] 40 years, we have never seen a demand supercycle of the type we’re seeing right now. Data centers are a part of that, so are other large loads, so is onshoring of manufacturing, so is just retail growth and the electrification of things in the home and in the office.”
According to short-term energy forecasts from the U.S. Energy Information Administration (EIA), a federal agency within the Department of Energy, nationwide electricity consumption is projected to increase 1.7 percent annually between 2020 and 2026.
As for natural gas services, blame an unusually cold winter. “Colder-than-normal temperatures across much of the United States in January and February resulted in increased consumption of natural gas and more withdrawals from U.S. natural gas storage than normal,” an April EIA report stated. Meanwhile, a separate EIA report also released in April found that natural gas production was “relatively flat” in 2024. Rising demand that outpaces production (supply) typically translates to higher prices.
So, are American households paying more on energy relative to the previous month? Yes, but only slightly. As previously mentioned, the CPI for the energy sector increased 0.7 percent for the month. Meanwhile, the CPI for household energy—which, per the BLS, “measures the price movement of residential energy items used for heating, cooling, lighting, cooking, and other appliances and household equipment”—increased 0.3 percent.
Energy prices have, on average, declined since Trump returned to the White House on January 20, though not across the board. The CPI for energy has experienced 1.5 percent deflation since January, while specific indexes for electricity and natural gas services increased 2.8 percent and 9.2 percent, respectively, in that same time frame. Moreover, CPI inflation for household energy since January has increased 1.9 percent.
The Dispatch Fact Check has reached out to the White House press office for comment.
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