US consumer inflation surged 4.2 percent last month compared to April 2020, the Labor Department said Wednesday, posting the biggest year-on-year increase since 2008 as the economy recovered from the pandemic.
Compared to March of this year, the Consumer Price Index (CPI) rose 0.8 percent last month, seasonally adjusted, far above expectations and driven by widespread price increases including for used vehicles and food, according to the report.
The data is sure to add fuel to the debate over whether the Federal Reserve’s strategy of keeping interest rates low for a long period of time and allowing somewhat higher inflation to spur employment growth, as well as President Joe Biden’s massive spending proposals, could overheat the economy.
Fed officials have insisted any spikes in prices will be temporary as the world’s largest economy recovers from the mass layoffs and business restrictions caused by the Covid-19 pandemic.
“In the coming months, ongoing base effects, price increases stemming from the reopening of the economy and some pass-through of higher prices from supply chain bottlenecks should prompt higher inflation,” Kathy Bostjancic of Oxford Economics said.
“However, we believe part of the acceleration in inflation will be transitory, and we share the Fed’s view that this isn’t the start of an upward inflationary spiral,” she said, predicting the price increases would cool next year.
The annual CPI increase was driven by huge double-digit price surges for gasoline and fuel oil, the report said. Excluding the more volatile food and energy prices, “core” CPI rose 3.0 percent year-over-year.
A third of the month-on-month CPI increase was due to a 10 percent jump in prices of used cars and trucks, its biggest rise since the Labor Department began tracking it in 1953, according to the report.
Food prices rose 0.4 percent from March, including both groceries and takeaway meals, far above the 0.1 percent growth registered the month before.
However, energy prices declined 0.1 percent in the month amid a dial back in global oil prices, though it was more than 25 percent above its level in April 2020, the month when a supply glut briefly caused oil prices to turn negative.
Core CPI jumped 0.9 percent in April, its largest monthly increase since 1982.
There were signs in the data of the types of transitory price increases the Fed and Biden administration had predicted.
Airline fares were up 9.6 percent from April 2020 as Covid-19 vaccines cause Americans to plan trips delayed by the pandemic.