US consumer prices surge 4.2 percent in April, biggest jump since 2008

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Inflation rose at its fastest pace in more than 12 years for April as businesses reopened and the pandemic eased, the feds said Wednesday. 

The Labor Department reported its consumer-price index, which measures a basket of goods as well as energy and housing costs, jumped 4.2 percent in April from a year earlier. That’s the biggest 12-month jump since the summer of 2008. 

Economists surveyed by Dow Jones expected a spike in prices, but not to this degree. They were looking for a 3.6 percent increase.

Consumer prices rose a seasonally adjusted 0.8 percent in April from March. The feds said that higher prices for used cars and trucks, which jumped 10 percent from March, accounted for more than a third of that increase, the Labor Department said. It was that index’s biggest leap since the government began tracking those costs in 1953.

While the data indicates that prices are on the rise, one driver of the massive annual gain is that inflation was very low this time last year, when the pandemic gutted the economy and consumers were spending less. That could distort year-over-year comparison as the economy reopens.

Those comparisons aside, prices are spiking throughout the economy for a variety of reasons. A global microchip shortage that’s hurt car manufacturing has sent the prices of used cars soaring.

Commodities from lumber to corn and other crops have risen dramatically, and many companies are passing those costs on to consumers, sending the price for new houses, food — and more — upward. 

Prices that were long deflated due to the pandemic like airfare and hotel rooms are also rising as American consumers venture out and begin spending again. And panic buying for gasoline spurred by the shutdown of Colonial Pipeline has sent the price of gas soaring to levels not seen since 2014. 

Despite soaring costs, many economists and policymakers see the inflation as temporary, and expect it to calm down as the economy reopens then stabilizes. Fed officials have said they will not raise interest rates or ease government bond purchases until inflation falls to around 2 percent.

“While the surge in inflation over the past year was driven in part by base effects, given last year’s economic lockdowns, we are seeing prices rise for all sorts of things, like lumber, auto parts, semiconductors, groceries and gasoline,” Nancy Davis, founder of Quadratic Capital Management, said in response to the data.

“I expect inflation data to remain elevated over the coming months, given the widespread reopening of the economy, shortages or delays in many manufactured goods and a dovish Federal Reserve that is willing to let inflation run above its 2% target.”

The inflation data sent stocks down as investors digested the soaring consumer costs. The tech-heavy Nasdaq dropped more than 1 percent while the Dow Jones Industrial Average slid over 100 points, or 0.3 percent. 

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