Inflation: U.S records highest monthly increase in consumer prices in 10 years
A worrisome bout of inflation struck the United States 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 year-over-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 coronavirus pandemic recession.
The US Department of Labor reported 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 increases. Prices for vehicles, both used and new, have been soaring as a result of 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, fuelled 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.
“With growth robust, firms have a measure of pricing power that they haven’t had in decades, and they appear to be using it,” said Joel Naroff, chief economist at Naroff Economic Advisors.
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 February 26.
Wednesday’s 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.
Last month, Powell suggested at a news conference that Fed officials expect inflation to move above its 2 percent annual target over the next few months.
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.
Powell has said that as long as the increase in inflation doesn’t appear to be hurting consumer and business expectations about price increases, the Central Bank would be willing to let prices rise without acting to raise interest rates. That view has been supported by comments from other Fed officials including Lael Brainard, a board member who warned against a premature Fed tightening that could harm the economy.
Source: Al jazeera
