Inflation accelerated at its fastest pace in more than 12 years for April as the U.S. economic recovery kicked into gear and energy prices jumped higher, the Labor Department reported Wednesday.
The Consumer Price Index, which measures a basket of goods as well as energy and housing costs, rose 4.2% from a year ago, compared to the Dow Jones estimate for a 3.6% increase. The monthly gain was 0.8%, against the expected 0.2%.
Excluding volatile food and energy prices, the core CPI increased 3% from the same period in 2020 and 0.9% on a monthly basis. The respective estimates were 2.3% and 0.3%.
The increase in the headline CPI rate was the fastest since September 2008.
Energy prices overall jumped 25% from a year ago, including a 49.6% increase for gasoline.
In addition to rising prices, one of the main reasons for the big annual gain was because of base effects, meaning inflation was very low at this time in 2020 as the Covid-19 pandemic caused a widespread shutdown of the U.S. economy. Year-over-year comparisons are going to be distorted for a few months because of the pandemic’s impact.
For that reason, Federal Reserve policymakers and many economists are dismissing the current round of numbers as transitory, with the expectation that inflation settles down later this year around the 2% range targeted by the central bank.
Price surges also have come amid supply bottlenecks caused by a number of factors, from production issues with the ubiquitous semiconductors found in electronics products to the Suez Canal blockage in March to soaring demand for a variety of commodities.
Lumber prices alone have risen 124% in 2021 amid persistent demand for building materials. Copper, often seen as a proxy for economic activity, has jumped nearly 36%.
Still, Fed officials repeatedly have said they will not raise interest rates or pull back on monthly bond purchases until inflation averages around 2% over an extended period.