WASHINGTON, May 12 — US consumer inflation surged 4.2 per cent last month compared to April 2020, the Labour 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 per cent 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 per cent year-over-year.
A third of the month-on-month CPI increase was due to a 10 per cent jump in prices of used cars and trucks, its biggest rise since the Labour Department began tracking it in 1953, according to the report.
Food prices rose 0.4 per cent from March, including both groceries and takeaway meals, far above the 0.1 per cent growth registered the month before.
However, energy prices declined 0.1 per cent in the month amid a dial back in global oil prices, though it was more than 25 per cent above its level in April 2020, the month when a supply glut briefly caused oil prices to turn negative.
Core CPI jumped 0.9 per cent 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 per cent from April 2020 as Covid-19 vaccines cause Americans to plan trips delayed by the pandemic. — AFP
