Consumer prices surge 0.8% in April

A worrisome bout of inflation struck the U.S. economy in April, with consumer prices for goods and services surging 0.8 percent — the largest monthly jump in more than a decade — and the yearover-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 percent 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 percent, 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 percent — the fastest rise since a 4.9 percent gain in the 12 months that ended in September 2008. Excluding volatile food and energy, core inflation rose 0.9 percent in April and 3 percent 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 Tuesday, the Dow Jones Industrial Average sank more than 470 points — 1.4 percent — its worst day since Feb. 26.

After Wednesday’s release of the CPI report, which showed a bigger increase than economists were expecting, bond yields rose. The yield on the 10-year Treasury note rose to 1.67 percent from 1.62 percent a day earlier. Bond prices tend to fall, sending yields higher, when investors fear that an increase in inflation will erode the future value of the income that bonds pay.

The April inflation report showed that food prices rose 0.4 percent, the biggest such increase since a 0.5 percent rise last June. Energy costs, though, edged down 0.1 percent, with gasoline pump prices falling 1.4 percent, the biggest drop since May 2020.

The Fed has said it will allow prices to rise slightly above 2 percent for a period of time to make up for the past decade’s shortfalls in inflation.