Skip to Content
Global News Select

Inflation Likely Accelerated in April as Economy Strengthened

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 the pandemic.

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 prices."

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 Business.

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% by December.

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% inflation goal.

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 achieved.

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


(END) Dow Jones Newswires

May 12, 2021 05:44 ET (09:44 GMT)

Copyright (c) 2021 Dow Jones & Company, Inc.

Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.

We’d like to share more about how we work and what drives our day-to-day business.

We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.

How we use your information depends on the product and service that you use and your relationship with us. We may use it to:

  • Verify your identity, personalize the content you receive, or create and administer your account.
  • Provide specific products and services to you, such as portfolio management or data aggregation.
  • Develop and improve features of our offerings.
  • Gear advertisements and other marketing efforts towards your interests.

To learn more about how we handle and protect your data, visit our privacy center.

Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.

To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.

Read our editorial policy to learn more about our process.