US consumer prices in April increased 4.2% from a year earlier, more than the 3.6% economists had predicted. It was the biggest 12-month increase since September 2008, the height of the financial crisis.
Prices rose 0.8% on a seasonally adjusted basis between March and April — also more than analysts had expected.
Stripping out more volatile food and energy prices, core inflation was 3% in the 12-month period through April, the biggest increase since January 1996. For the month, core prices rose 0.9%, the largest monthly increase in 39 years.
Inflation accelerated because “the economy is recovering from the downturn of 2020 as more Americans are vaccinated, stimulus fuels consumer spending, and businesses gear up for the recovery,” said PNC senior economist Bill Adams.
Prices for shelter and lodging, airline tickets, recreational activities, car insurance and furniture also contributed to the April price increases. Clearly people are willing to travel again, and businesses in the industry are responding with price increases after a year of operating on a very limited scale.
“Take a step back. All these components have been pushed up by the reopening of the services sector, with the exception of the used car component, but here too Covid is the story,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics.
“People need to go back to work, but reluctance to use public transportation has driven up demand for used cars, and prices have surged. This won’t go on forever,” he added.
Food prices rose 0.4% in April as both groceries and restaurant prices went up. Year-over-year, food prices are up 2.4%.
Meanwhile, energy prices, which had been a major driver of inflation over the past months, came down slightly. Even so, over the past 12 months, the energy price index climbed more then 25%.
Supply chain squeeze
US stocks started the day lower following the report, with all three major stock indexes in the red.