- The consumer price index accelerated to 8.3% in April, more than the 8.1% estimate and near the highest level in more than 40 years.
- Core CPI, which excludes food and energy, was also higher than expected, rising 6.2%.
- Housing costs, which make up about one-third of the CPI, rose at their fastest pace since 1991.
- Inflation-adjusted earnings continued to decline for workers, falling 2.6% last year due to rising costs of living.
Inflation rose again in April, continuing a rise that has pushed consumers to the brink and threatened the economy’s expansion, the Bureau of Labor Statistics reported Wednesday.
The consumer price index, a broad-based measure of prices for goods and services, rose 8.3% from a year ago, higher than the Dow Jones estimate for an 8.1%. profit. That represents a slight ease from the peak in March but is still close to the highest level since the summer of 1982.
Excluding volatile food and energy prices, the so-called core CPI still rose 6.2%, against expectations for a 6% gain, fueling hopes that inflation rose in March.
The month-over-month gains were also higher than expected – 0.3% in headline CPI compared to 0.2% estimate and 0.6% increase in core, against the outlook for a 0.4% gain.
Rising prices also mean that workers continue to lose land. Real wages adjusted for inflation fell 0.1% in the month despite a nominal increase of 0.3% in average hourly earnings. Last year, real earnings fell 2.6% even though average hourly earnings were up 5.5%.
Inflation is the single biggest threat to the recovery that began early in the Covid pandemic and sees the economy in the 2021 period at its largest annual growth rate since 1984. The increase in pump prices and the grocery store is a problem, but inflation spreads beyond these two areas to housing, car sales and many other areas.
Federal Reserve officials responded to the problem with two interest rate hikes this year and promised more until inflation reaches the central bank’s 2% goal. However, Wednesday’s data showed that the Fed has a big job ahead.
The CPI gains came even as energy prices fell 2.7% for the month, including a 6.1% drop in gasoline. The BLS food index rose 0.9% in April, countering the decline in energy. On a 12-month basis, energy costs increased by 30.3% while food increased by 9.4%, according to unadjusted data. Gasoline costs at the pump this week reached their highest level yet unadjusted for inflation.
“We’re starting to see energy come back a little bit, but it’s not enough,” said Kathy Jones, chief fixed income strategist at Charles Schwab. “Markets are hoping for a better number and it won’t be enough to prevent further Fed tightening.”
Adding to the concern is the continued rise in housing costs.
The shelter index, which makes up about a third of the CPI’s weight, rose another 0.5%, matching its gains in the past two months, and rose 5.1% annually, the fastest gain since April 1991 .
Although the initial reaction was negative, stocks turned positive after the report. Government bond yields rose, pushing the yield on the benchmark 10-year Treasury note near 3.02%.
Markets are looking for signs that the 8.5% CPI reading in March will mark the peak of inflation during the pandemic.
However, the April report showed that “this is another inflationary surprise and suggests that the slowdown is too slow,” said Seema Shah, chief strategist at Principal Global Investors.
Airline fares continue to rise as more and more people take to the skies amid increased business travel and vacations. Prices rose 18.6% in the month and rose, according to unadjusted data, 33.3% last year.
Auto sales have also been a big contributor to inflation as supply chain issues, particularly with semiconductors that are critical to car operating systems, have pushed up prices. Used car prices fell 0.4% in the month but new car prices rose 1.1%. Prices increased by 22.7% and 13.2% for the two categories respectively last year.
April also saw significant price increases in select food areas. Poultry rose 3.4% and eggs rose 10.3% amid bird flu fears, while bacon rose 2.5% and breakfast cereal rose 2.4% Ham prices fell 1.8%.
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