Consumer prices shot up 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% — 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% surge in the prices of used cars and trucks — a record jump — accounted for roughly one-third of March’s overall increases.
The cost of new cars was up 0.5%, the largest increase since last July. Prices for vehicles, both used and
“It’s pretty evident when you pull onto our lots that there’s not much selection,” said Gilchrist, whose lots carry brands ranging from General Motors and Ford to Nissan and Volkswagen. “Our [sales] volume is falling because of the sheer lack of inventory. It will still fall during the next two or three months.”
The across-the-board surge in auto prices contributed mightily to last month’s jump in U.S. consumer prices, the government reported Wednesday. A record 10% increase in used vehicle prices, in fact, accounted for roughly one-third of April’s overall rise in consumer prices — the sharpest monthly increase in more than a decade.
Ford expects to produce only half its normal number of vehicles from now through June. GM and others have resorted to halting production of some cars and smaller SUVs and diverting computer chips to higher-profit pickup trucks and large SUVs. Leading automakers are warning of diminished earnings.
The vehicle scarcity and the soaring prices can be traced to the eruption of the coronavirus 14 months ago. As the virus spread, auto factories shut down for a couple of months. With millions more people working from home, demand for laptops and monitors led semiconductor makers to shift from autos to personal electronics. Soon, though, a faster-than-expected economic rebound boosted demand for vehicles, and auto plants tried to restore full-scale production. Yet chip makers couldn’t respond swiftly enough.
With production slowed, dealer inventories shrank. Now, as the chip shortage has persisted, the shortage of new vehicles has worsened, and analysts foresee no return to normal before next year.
Yet so far, automakers have been earning big profits even with a depleted inventory, largely because many buyers have been willing to pay more to get what they want. With government stimulus checks and tax refunds in hand, Americans bought about 1.5 million new vehicles in April. That’s an adjusted annual sales rate of 18.5 million — the highest such rate since 2005.
“It’s like toilet paper was a year ago,” said Michelle Krebs, executive analyst for Cox Automotive. “Everyone is rushing to buy a car.”