By Gwynn Guilford
U.S. consumer prices likely rose sharply in April as the
economic recovery picked up, reflecting surging demand as the
pandemic eased and higher prices due to supply bottlenecks.
Economists surveyed by The Wall Street Journal expect the Labor
Department to report its consumer-price index jumped 3.6% in April
from a year earlier, up from 2.6% for the year ended in March. That
would be the highest 12-month level since the summer of 2011. They
expect to see the index rose a seasonally adjusted 0.2% in April
from March. The index measures what consumers pay for goods and
services, including clothes, groceries, restaurant meals,
recreational activities and vehicles.
The so-called core price index, which excludes the
often-volatile categories of food and energy, likely rose 2.3% in
April from a year before, the economists estimated.
Consumers are seeing many prices jump for a variety of reasons
as the U.S. economic recovery gains momentum. Used-car prices have
surged, thanks to a global chip shortage that has dampened
production of new cars. The average price paid for a used car
exceeded $25,000 in April for the first time in the history of
research firm J.D. Power's tracking. Many companies are passing on
to consumers the higher costs they are facing for crops, oil and
truckers' wages. Airfares and hotel-room rates are climbing as
consumers start traveling again after a year of restraint during
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 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.
"I think a lot of us are expecting a pretty significant increase
of spending on services in the next couple months and that's where
a lot of the pressure on CPI is going to come from," said Richard
F. Moody, chief economist at Regions Financial Corp. "It's a
question of how long that burst in spending persists. And the
longer it persists, the more latitude producers have to raise
The annual inflation measurements will be boosted by comparisons
with the figures from last year early in the pandemic, when prices
dropped steeply due to collapsing demand for many goods and
services during Covid-19 lockdowns, said Laura Rosner-Warburton,
senior economist at MacroPolicy Perspectives. This so-called base
effect is expected to influence inflation readings until the
summer, she said.
Some 36% of small businesses indicated that they had raised
selling prices in April, the highest share since 1981, according to
a survey conducted by the National Federation of Independent
Policy makers are watching April's reading to gauge the extent
of what many expect to be a monthslong rise in prices, after a year
of anemic overall inflation as the pandemic curbed consumer
spending. Whether an upswing in prices proves temporary is a key
question for financial markets and the U.S. recovery, as the Biden
administration, Congress and the Federal Reserve continue to
support the economy with fiscal- and monetary-policy measures.
Economists surveyed in March by the Journal expect this year's
inflation pickup to prove temporary. They projected on average that
annual inflation, measured by the CPI, will rise to 3% in June,
which would be the highest rate since 2012, before falling to 2.6%
The Fed also expects inflation to climb temporarily this year. A
persistent, significant increase in inflation could prompt the
central bank to tighten its easy-money policies earlier than it had
planned, or to react more aggressively later, to achieve its 2%
The central bank's inflation goal is based on a different
measure: the Commerce Department's price index of
personal-consumption expenditures, which tends to run a bit below
the CPI. The Fed has said it would hold rates near zero until PCE
inflation is averaging 2% and full employment has been
Once prices rise, they seldom fall back to where they were, even
if the acceleration in overall inflation is temporary, Mr. Moody
said. "That very much matters in terms of what's the lasting impact
on household budgets," he added.
John Wertz, a 34-year-old Seattle resident, said he has noticed
a sharp climb in prices for steak, beer, ride-sharing services,
takeout and other goods and services -- and has cut back
accordingly. Mr. Wertz said he is conflicted in particular about
having to pull back on visits to the breweries he used to frequent
and still wants to support.
"I'd say prices for grabbing a beer to consume on site have gone
up around 15% to 20%. This is a combination of either raising the
sticker price or no longer including sales tax in the sticker
price," said Mr. Wertz, who is earning his Ph.D. in accounting.
"Either of these makes it harder to justify going out as often
because the amounts add up."
Stronger demand has spurred employers to try to hire more
workers, but many businesses are saying they can't find enough
people to hire. Job openings reached a high in March as the gap
widened between open positions and workers taking the roles, a
dynamic that could push up wages.
The employment cost index for the first quarter of 2021 showed
that wage growth returned to the same pace as in 2018 and 2019, in
what was a tight labor market at the end of the last expansion.
Write to Gwynn Guilford at firstname.lastname@example.org
(END) Dow Jones Newswires
May 12, 2021 05:44 ET (09:44 GMT)
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