Consumer prices shot up 0.8% in April as worries escalate
A worrisome bout of inflation struck the economy in April, with U.S. consumer prices surging 0.8%, the largest monthly jump in more than a decade and the year-over-year increase reaching its fastest rate since 2008
May 12, 2021, 10:36 PM
5 min read
Share to FacebookShare to TwitterEmail this articleIn this photo provided by the New York Stock Exchange, traders work on the floor, Friday, May 7, 2021. Stocks are rallying to records on Wall Street Friday despite a stunningly disappointing report on the nation's job market, as investors see it helping to keep interest rates low. (Nicole Pereira/New York Stock Exchange via AP)
WASHINGTON -- A worrisome bout of inflation struck the U.S. economy in April, with consumer prices for goods and services surging 0.8% — the largest monthly jump in more than a decade — and the year-over-year increase reaching its fastest rate since 2008.
The acceleration in prices, which has been building for months, has unsettled financial markets and raised concerns that it could weaken the economic recovery from the pandemic recession.
Wednesday's report from the Labor Department showed sharply higher prices for everything from food and clothes to housing. A 10% surge in the prices of used cars and trucks — a record jump — accounted for roughly one-third of last month's overall increases.
The cost of new cars was up 0.5%, the largest increase since last July. Prices for vehicles, both used and new, have been soaring as a result of heavy demand and a computer chip shortage that has slowed auto production and reduced dealer supplies.
Over the past 12 months, consumer prices have jumped 4.2% — the fastest rise since a 4.9% gain in the 12 months that ended in September 2008. Excluding volatile food and energy, core inflation rose 0.9% in April and 3% over the past 12 months.
After years of dormant inflation, with the Federal Reserve struggling to increase it, worries about rising prices have shot to the top of economic concerns. Shortages of goods and parts related to disrupted supply chains have been a key factor.
The Fed, led by Chair Jerome Powell, has repeatedly expressed its belief that inflation will prove temporary as supply bottlenecks are unclogged and parts and goods flow normally again. But some economists have expressed concern that as the economic recovery accelerates, fueled by rising demand from consumers spending freely again, so will inflation.
“It looks like inflation pressures are not only building but are likely to be here at least through the rest of the year,” said Joel Naroff, chief economist at Naroff Economic Advisors. “With growth robust, firms have a measure of pricing power that they haven't had in decades, and they appear to be using it.”
Investors, too, have grown increasingly jittery. On Wednesday, the S&P 500 fell 2.1% after a 0.9% drop on Tuesday, with the declines blamed on investors' rising fears about inflation.
The April inflation report showed that food prices rose 0.4%, the biggest such increase since a 0.5% rise last June. Energy costs, though, edged down 0.1%, with gasoline pump prices falling 1.4%, the biggest drop since May 2020.
Economists warned, though, that gasoline prices could go higher this month. Colonial Pipeline said Wednesday it had restarted operations after a cyberattack forced a shutdown in its pipeline that supplies the East Coast with 45% of its fuel. The AAA auto club reported that the nationwide average price for a gallon of gas rose to $3 Wednesday, up from $2.93 a week ago.
Last month, Powell suggested at a news conference that Fed officials expect inflation to move above its 2% annual target over the next few months, in part because of what economists call the base effect: Year-over-year inflation will look larger in April and May because those months are compared with the same months in 2020, when prices were sinking as the pandemic shut down much of the country. Those year-over-year figures should look smaller once they are compared with later months in 2020, by which time many prices had recovered.
The Fed has said it will allow prices to rise slightly above 2% for a period of time to make up for the past decade's shortfalls in inflation.
