One of the most anticipated data drops for inflation watch 2021 came out Wednesday as the Bureau of Labor Statistics released its Consumer Price Index for April, showing the biggest gains in over a decade, jumping 0.8% compared to March 2021.
The CPI climbed 4.2% in April from a year earlier, up from 2.6% for the year ended in March.
Supply shortages due to the pandemic and unleashed consumer demand as vaccinations ramp up are largely the reason for these changes, conditions that the Federal Reserve considers transitory as things readjust.
Looking into the data shows many categories that increased in price a bit, and a few items that have an outsized impact. Here are the top three.
Used cars and trucks
Prices for used cars and trucks jumped 10.0% in April, a staggering number.
“This was the largest one-month increase since the series began in 1953, and it accounted for over a third of the seasonally adjusted all items increase,” the BLS noted in the release.
Compared to April 2020, the increase is a whopping 21.0%. (New vehicles prices rose 0.5%.)
"In terms of auto prices, we think the recent run-up is related to production issues limiting supply and that once supply chain issues are eventually resolved, prices could move down," JPMorgan’s Daniel Silver wrote in a note Wednesday discussing the inflation metrics. “The recent surge, which will probably continue in May, but is unlikely to be the start of trend, appears to be due in part at least to fallout from the semiconductor shortage.”
Airline fares rose 10.2% since March and are up 9.6% compared to 12 months ago, as the reopening continues and travel resumes.
Car rental and lodging away from home
Prices for lodging away from home rose 7.6% and car and truck rentals surged 16.2% — the latter of which constitutes an 82.2% increase compared to April 2020. Part of the car-rental cost story comes from the auto supply issues, JPMorgan noted. With supply for cars tight, car-rental prices follow in lockstep.
What this means going forward
The fact that the biggest surges have to do with travel and transportation, categories specifically related to reopening post-pandemic, is an important one.
“The month-to-month rise in core prices was led by travel-related parts in particular, consistent with it being downplayed as ‘transitory’ by Fed officials,” JPMorgan’s Silver wrote.
Other categories are seeing the effects of the post-pandemic economic reopening as well, with recreation prices up 0.9%, food up 0.4%, car insurance prices up 2.5%, and education and apparel both up 0.3% month over month.
"Inflation is likely to head even higher over the next couple of months as price levels in a vibrant, strengthening economy that has supply constraints, contrast starkly with those of twelve months ago when the economy was in lockdown and prices were being slashed in order to generate cashflow," analysts at ING wrote in a note after the BLS release.
And even though inflation is on the rise, prices everywhere aren’t necessarily back to where they used to be.
“Prices for lodging and airfares still have room to climb higher to bring levels more in line with pre-pandemic norms and we think that the relative normalization in travel and tourism will keep boosting these prices going forward,” Silver noted. “A bigger question is what happens to these prices once they get back closer to pre-pandemic levels."