On Wednesday morning, The Labor Department confirmed what most Americans have noticed for months: the price of just about everything is going up.
The Consumer Price Index – which tracks the cost of housing, apparel, food, medical care, and other goods and services – increased 4.2% in the last year. That’s the highest 12-month level since 2008. From March to April, prices increased 0.8 percent – an unusually large short-term bump that raises concerns about inflation.
Some categories in the CPI skyrocketed. Energy prices soared 25% from a year earlier, including a 49.6% bump for gasoline and 37.3% for fuel oil. Used car and truck prices, which are seen as tell tale signs of inflation, grew 21%, including a 10% increase in April alone.
Higher prices may scare consumers, but officials maintain that they reflect a post-pandemic economy that is finally beginning to recover. From The Washington Post:
Fed Chair Jerome H. Powell and White House officials argue that price bumps will be temporary and won’t pulse through the whole economy. They say that as people start shopping or eating out more frequently, backlogged supply chains will force businesses to raise prices.
“We think of bottlenecks as things that, in their nature, will be resolved as workers and businesses adapt and we think of them as not calling for a change in monetary policy since they’re temporary and expected to resolve themselves,” Powell said in a news conference last month.
The Wall Street Journal identifies the key reasons behind the highest CPI since the Great Recession:
More broadly, rising prices reflect strong consumer demand fueled by widespread Covid-19 vaccinations, easing business restrictions, trillions of dollars in federal pandemic relief programs and ample consumer savings. Real U.S. gross domestic product rose 6.4% at a seasonally adjusted annual rate in the first quarter and economists surveyed by The Wall Street Journal in March forecast the second quarter to grow at an 8.1% annual rate, putting the U.S. economy on track for its best year since the early 1980s.
