From sausage to sewing machines, here are the everyday products and services that have gone up the most in price since last year

grocery shopping
  • Prices for American consumers increased 0.9% last month, the largest increase in a decade.
  • Used cars have made headlines, while others, like sewing machines, have caused less of a stir.
  • Products and services in over 45 categories had price increases of more than 5%.
  • See more stories on Insider’s business page.

Consumer prices are rising, ticking up by 0.9% last month. That’s the largest increase in more than a decade, according to the latest US government figures.

But that figure is just a summary of the overall price picture for American households – the important stuff is in the details.

To see how that top-line number is playing out in everyday life, Insider pored through the tables and plucked out more than 45 product and service prices that have increased by more than 5% since last year.


Food

bacon
Bacon and pork prices are up.

  • Bacon +8.4%
  • Other Pork +6.5%
  • Fresh Seafood +6.4%
  • Whole Milk +7.5%
  • Apples +6.5%
  • Citrus Fruits +9.5%
  • Other Fruit +8.7%
  • Lettuce +5.1%
  • Fast Food +6.2%
  • Vending machine snacks +5.7%

Read more: Why you’re paying more for beef, pork, and eggs right now and when prices are expected to go back down


Fuel

A woman holds a pump nozzle in her hand at a gas station and refuels a car.
People are paying more at the pump.

  • Fuel Oil +44.5%
  • Propane, Kerosene, and Firewood +17.7%
  • Gasoline +45.1%

Read more: How much gas costs in different regions of the US


Home Items

home depot customer shopper washing machines
Household appliances are getting more expensive.

  • Carpets +5.3%
  • Household Furniture +8.6%
  • Washers and Dryers +29.4%

Read more: Wealthy homeowners are dropping nearly $40,000 on luxury stoves that won’t arrive for months. It’s a symptom of a broader appliance shortage hampering homeowners and industry insiders alike.


Clothes and Accessories

levi's jeans
Shoppers are refreshing their wardrobes.

  • Men’s Pants and Shorts +11.1%
  • Boys’ Apparel +5.5%
  • Women’s Outerwear +8.4%
  • Women’s Dresses +15.8%
  • Girls’ apparel +5.5%
  • Shoes +6.5%
  • Watches +7.8%
  • Jewelry +12.3%

Read more: Levi’s CEO says our lockdown weight fluctuations are driving sales for the brand


Vehicles

Comprehensive Car Insurance
The chip shortage is creating all sorts of issues in the autos market.

  • New Trucks +5.7%
  • Used Cars and Trucks +45.2%
  • Tires +5.2%

Read more: Used Corvettes are worth $26,000 more than they were new last year. Here are 8 more used cars that gained value since 2020.


Services

United Airlines Planes Landing
Air travel is coming back strong.

  • Hotels and Motels +16.9%
  • Domestic Services +10.6%
  • Moving and Storage +17.3%
  • Car and Truck Rental +87.7%
  • Car Insurance +11.3%
  • Airline Fares +24.6%
  • Cable and Satellite +TV 5.1%
  • Vet Services +5.2%
  • Delivery Services +7.7%
  • Land-line phone service +6.4%

Read more: All the things that will make your summer vacation more expensive this year


Other Stuff

seamstress, sewing machine
Supplies for hobbies and home arts and crafts are more expensive.

  • Televisions +7.6%
  • Sporting goods +7.5%
  • Cameras +5.6%
  • Sewing Machines and Supplies +13.3%
  • Cigarettes +7.3%

Read more: Here’s everything that could get more expensive in 2021

Read the original article on Business Insider

All the things that will make your summer vacation more expensive this year

summer vacation
Summer 2021 is getting a little pricey.

  • You’ll be paying more for airlines, hotel stays, and vehicle rentals this summer.
  • Prices for all have soared during 2021, hitting their highest yet in June.
  • The Consumer Price Index rose 0.9% between May and June, much more than the consensus estimate of 0.5%.
  • See more stories on Insider’s business page.

Summer vacation is getting expensive.

Prices for airlines, hotel stays, food, and car and truck rentals have all soared over the past several months as part of a larger inflation trend amid supply chain issues and an economic reopening. But they all hit new heights in June.

Just look at the chart below, which details travel inflation during 2021 based on the Bureau of Labor Statistic’s Consumer Price Index, which tracks how the prices of a broad variety of goods and services change from month to month.

Car and truck rental prices have increased the most since January, currently 64.4% higher than they were at the beginning of the year. From May to June alone, vehicle rental prices increased by 5.2%.

Prices for hotel stays are also climbing after dipping slightly in May. They increased the most month-over-month, by 7.9% from May to June. They’re currently 19.8% higher than they were in January.

Plus, if you eat our or hit the grocery store while on vacation, food like beef, pork, and eggs cost more these days.

Though not called out in BLS data, Uber, Lyft, and Airbnb prices are also on the rise.

Airline prices have also ticked up since the beginning of the year, but not to the extent that lodging and vehicle rentals have. They saw a more modest increase of 2.7% from May to June, currently 15.4% more expensive than at the start of 2020.

Consumer prices overall surged even more than expected last month, rising 0.9% between May and June. That far exceeded Bloomberg’s consensus estimate among economists of 0.5%. It’s the highest month-over-month inflation rate since April 2008’s 1.0% increase.

The index was 5.4% higher than it was in June 2020, also higher than economists’ expectations for a 4.9% year-over-year increase, according to Bloomberg. June’s annual increase follows a 4.9% year-over-year increase in May.

Ready for a travel boom

The travel industry itself has contributed to the surge in prices. After spending a year in quarantine, Americans were itching to travel again. As many became vaccinated and restrictions lifted, some were finally ready to pack their bags.

As early as late March, travel was on the verge of a booming comeback. Americans had plans to travel soon, card spending on airlines and hotels was already up, and airports started seeing their busiest weekends since pre-pandemic times.

Set to fuel the travel boom are wealthy millennials, who are most likely to spend their pandemic savings on travel this year, according to a May survey from Accenture and TripAdvisor that polled 1,000 Americans. It found this cohort comprised the highest rate of luxury bookings (trips costing at least $5,000) among all other generations surveyed.

“Whether it’s a domestic or international flight, young travelers are going the distance and heading to beaches, cities, and even on cruises,” the survey reads.

It’s all good for the economy, which needs such spending to get back on its feet. But while the upside of high travel demand may be a healthier economy, the downside is that Americans will have to pay more for it. It spins an endless inflation cycle: The more everyone wants to travel, the more costly doing so will be.

It’s yet to be seen whether inflation is a temporary effect from reopening or a longer-term problem. But travel inflation may not be going anywhere soon. That vehicle rentals have seen the most consistent and highest demand indicates not everyone is comfortable traveling publicly just yet. It’s a sign that we may see a bigger uptick in airline and hotel spending – and prices – down the road once they’re ready for more public travel.

That is all to say: you’ll be shelling a lot more to fly, drive, and relax this summer.

Read the original article on Business Insider

Prices keep rising but bitcoin still isn’t behaving like the inflation hedge it is said to be

Bitcoin golden physical coin illustration on United States Dollar banknotes.
  • Inflation concerns were further stoked Tuesday when the CPI saw its largest one-month increase in 13 years.
  • Yet bitcoin, widely viewed as a hedge against inflation, dipped lower after the CPI reading.
  • Some bitcoin bulls, however, maintain that the cryptocurrency will prove its use as a hedge against rising prices.
  • Sign up here for our daily newsletter, 10 Things Before the Opening Bell.

Inflation concerns were stoked on Tuesday when consumer prices between May and June saw their largest one-month increase in 13 years, but bitcoin, often touted as a hedge against a weaker dollar, failed to respond in kind.

US stocks dipped at the open, while bitcoin was flat and then steadily dropped over the course of the morning and early afternoon. The price of the world’s largest cryptocurrency by market capitalization was lower by about 2%, below $33,000 for most of the day following the announcement of the CPI figures.

The asset was trading at $32,854 as of 1:10 p.m. ET Tuesday.

This has happened with past readings, as well. In May, bitcoin fell 7% on a day when CPI data showed prices rising at their fastest rate since 2008. Theoretically, with higher inflation, demand for assets that can serve as alternative stores of values to cash would rise – bitcoin among them.

“Bitcoin isn’t behaving like an inflation hedge anymore and will continue to remain heavy over expectations over higher yields,” Ed Moya, senior equity analyst at foreign exchange firm Oanda, said in a Tuesday note.

That inflation is viewed as transitory, however, could be a reason why the June report wasn’t enough of a catalyst to break bitcoin’s sideways trading, Moya added.

Bitcoin has long been heralded as a hedge against inflation mainly due to its finite 21 million supply of coins. The idea is that bitcoin serves a similar purpose to gold in protecting against reckless fiscal policies that devalue fiat currencies.

Billionaire investor Mike Novogratz once said bitcoin’s value has increased because governments are printing money like “toilet paper.”

Some bitcoin bulls, however, maintain that the cryptocurrency will still prove its purpose one day.

“Bitcoin is still a hedge for inflation in the long run for most investors,” John Wu, president of Ava Labs, the team behind the altcoin avalanche, told Insider.

He continued: “However, given the amount of new investors in the space, there are investors that think of it as a risk asset and those incremental investors may be selling in the short term as a source of fund.”

Bitcoin’s price has been rangebound since a broader cryptocurrency crash in May.

But it seems that the digital asset is holding firm at its $30,000 support level the more it gets tested, Julius de Kempenaer, senior technical analyst at technical analysis platform StockCharts.com, told Insider.

“As a result, an eventual break below this level will become more and more meaningful,” he said. “If and when this happens, $20,000 is on the cards as the next level of support to watch.”

Read the original article on Business Insider

Used car prices jumped at the fastest rate on record last month, but there’s hope on the horizon

used car
Used car prices increased 10.5% in June.

  • Used cars and trucks were 10.5% more expensive in June than in May.
  • That’s the biggest increase since the Bureau of Labor Statistics started tracking in 1953.
  • Used cars have been a major cause of higher price inflation over the last few months.
  • See more stories on Insider’s business page.

If you’re in the market for a used car or truck, get ready to pay a lot.

The Bureau of Labor Statistics’ monthly Consumer Price Index release showed that inflation in June was much higher than economists had expected. One of the biggest contributors to overall prices rising was the 10.5% increase in used car and truck prices between May and June.

Looking at changes over the last year, used cars in June 2021 were 45.2% more expensive than in June 2020.

New cars also got more expensive, with prices increasing 2.0% between May and June, but those prices have been going up much more slowly than for used cars.

The whopping jump in used car prices was the biggest monthly increase since the Bureau of Labor Statistics started tracking these figures in 1953. It follows two other historically high monthly increases of 7.3% in May and 10.0% in April.

The used car market has gotten so upended that several models are now cheaper to buy new than used.

There are several reasons for the massive jumps in used car prices over the last few months. A global semiconductor shortage has left automakers without the computer chips needed to make new cars, cutting off supplies of new cars.

Rental companies sold off large swathes of their fleets last summer amid collapsing demand during the pandemic. Now that demand has come back, those companies are stocking back up, including turning to the used car market themselves and competing with regular consumers.

Despite the huge price increases of the last few months, relief could be on its way. Insider’s Tim Levin noted that according to Cox Automotive, wholesale car prices declined between May and June, and retail prices could follow.

Similarly, NPR’s Scott Horsely reported that “prices dealers pay for used cars at massive auctions across the country finally dipped in June.”

A research note from Morgan Stanley also predicted that as the auto market gradually returns to normal, “looking ahead we should see used car price increases begin to the decelerate as more recent industry data has started to turn modestly lower.”

But for now, used cars are still quite expensive.

Read the original article on Business Insider

Global shares hover near record highs as rising COVID cases and a slew of economic data leaves investors cautious

Stock Market Traders
  • Global shares remained near record highs despite COVID-19 cases continuing to rise.
  • US inflation, Chinese quarterly economic data and Jerome Powell’s semi-annual testimony to Congress are in focus.
  • Growth in Japan’s machinery sector boosted Asian stocks as it indicated sustained economic recovery.
  • Sign up here for our daily newsletter, 10 Things Before the Opening Bell.

Global shares were mixed on Monday, with economically sensitive sectors such as energy and banking under pressure, while more defensive parts of the market such as healthcare rose, as as COVID-19 cases linked to the delta variant continued to rise and bring renewed lockdowns.

Key data on US consumer inflation and regional manufacturing activity along with Chinese economic growth could provide a steer on how much the resurgence of COVID-19 is impacting the global recovery.

Federal Reserve Chairman Jerome Powell will also deliver his semi-annual testimony on the state of the economy to Congress this week, while the European Central Bank will revise its current monetary policies, which investors are expecting will provide them with guidance on growth and inflation in the eurozone.

US futures were a mixed bag, as Dow Jones futures dipped by 0.29% and S&P 500 futures were down 0.19%, while Nasdaq futures were up by 0.11% at 04:30 am E.T. on Monday.

“In the US, CPI data tomorrow will tell us whether we did indeed see the peak in inflation in May – our economists think we did, forecasting a slowdown in headline CPI from 5.0% to 4.8% in June, potentially putting a cap on Fed rate expectations for now.” ING analysts said.

The yield on the US Treasury 10-year note was last at 1.333%, down by 2.3 basis points, reflecting a degree of investor demand for so-called safe haven assets.

Rising COVID-19 cases linked to the Delta variant are also weighing on global markets as they signal a potential delay in post-pandemic economic recovery.

“We’re also seeing higher case counts in the UK, US and Europe, which could also add to the uncertainty,” Michael Hewson, chief market analyst at CMC markets said. “The lower vaccination rate in Europe could prove problematic in the days ahead,” he added.

European stocks dipped on Monday. Frankfurt’s DAX was last down 0.14%, while London’s FTSE 100 dipped by 0.56% and the EuroStoxx 50 index of top eurozone stocks was 0.25% lower.

The European Central Bank might announce revisions to its monetary policy at its meeting this week, but will not end its post-pandemic recovery program, ECB President Christine Lagarde said on Bloomberg TV.

Asian markets were boosted by Japanese machinery orders rising for the third consecutive month in May and the country posting higher than expected producer price index readings on Monday. The data releases boosted investor confidence in the economy recovering despite a rise in COVID-19 cases in the region.

Tokyo’s Nikkei 225 rose by 2.25% in response and pulled shares across the region up with it as the Shanghai Composite closed 0.67% higher and Hong Kong’s Hang Seng index rose by 0.65%.

The energy sector broadly declined on Monday. OPEC+ reached no agreement on production and abandoned a planned meeting last week, which has raised concern that the group could splinter and raise output at will. Brent crude futures were last down by 1.19%, trading for $74.65 per barrel, while WTI crude fell 1.17% to $73.69 a barrel. Natural gas was last trading 1.06% lower, while heating oil declined by 1.35%.

Read the original article on Business Insider

The Fed’s favored inflation gauge is at its highest since 1992, but Goldman Sachs says this ‘one-off inflationary boost’ will soon flip to a ‘one-off disinflationary drag’

Goldman Sachs Logo
  • The core PCE price index, the Federal Reserve’s favorite measure of inflation, rose in May at its fastest since 1992.
  • Goldman Sachs analysts said this “one-off inflationary boost” will over time become a “one-off disinflationary drag” over time.
  • They predict that core PCE inflation will drop to 3% by the end of 2021, and slip further to 2% by December 2022.
  • Sign up here for our daily newsletter, 10 Things Before the Opening Bell.

The Federal Reserve’s favored measure of inflation rose at its fastest pace since 1992 last month, driven primarily by price rises in products like cars, chips and furniture, but Goldman Sachs said this rise in inflation is temporary and will reverse itself over time.

The core Personal Consumption Expenditures price index, which strips out volatile food and energy prices, showed on Friday that personal spending had stagnated and inflation had picked up in May by 3.4% year-over-year.

Hold-ups in the supply chain – for goods such as semiconductors – and in global shipping have helped drive prices for consumer goods above pre-pandemic levels, Goldman Sachs analysts said in a research note Sunday.

On the demand side, coronavirus stimulus checks have pushed up buying of more expensive purchases, they noted. As a result, consumers are paying higher prices for new and used cars, consumer electronics, computer chips, furniture, appliances, and sports equipment.

“Prices in supply-constrained categories are likely to remain firm for at least a couple more months, but should eventually partially revert to pre-pandemic trends,” the analysts wrote. “This means that the current one-off inflationary boost will eventually become a one-off disinflationary drag.”

Goldman Sachs predicts that core PCE inflation will drop to 3% by the end of 2021, and slip further to 2% by December 2022, pulled lower by the falls in those product categories and as the boost from the reopening of the travel sector fades.

The Fed uses core PCE as its primary gauge of inflation, and it has signaled it will let inflation run above 2% for a time to allow the labor market to recover from the impact of the pandemic. It expects any jump in inflation during the recovery will be transitory, and a high rate of year-on-year price growth is seen as stemming from a comparison with levels in the early phases of the pandemic.

The supply and demand pressures will ease at different rates in the affected categories, the Goldman Sachs analysts said. Semiconductors should shake off their recent big price rises by the end of this year as the shortage improves, though the market is likely to stay under pressure until 2023, they forecast. Auto production could start to return to normal as early as the third quarter this year, as plants work through the summer shutdown, the analysts believe.

This return to normal will be brought on by a range of factors, such as growth in production capacity, better usage of current production resources, and an end to the global supply-chain snags.

“In short, the global goods sector is best thought of as facing a number of serious disruptions and challenges as the world economy recovers from the pandemic, not as having been pushed to its productive limits by the current level of demand,” the analysts said.

Read the original article on Business Insider

Bacon keeps getting more expensive – it now costs 13% more than last year, government data shows

Bacon
The price of bacon rose 13% year-on-year in May.

  • Bacon is way more expensive than it was a year ago.
  • The price of bacon has jumped 13% year-on-year, BLS data shows, and it rose 1.8% between April and May.
  • The consumer price index was up 5%, but signals suggest an inflation slowdown could be coming.
  • See more stories on Insider’s business page.

Bacon is now 13% more expensive than a year ago, according to the latest data from the Bureau of Labor Statistics (BLS).

And it’s not just shoppers facing higher prices: The owner of Burger King and Popeyes says prices for its key ingredients, including bacon, are rising, according to an internal report viewed by Bloomberg News.

The cost of bacon rose 1.8% between April and May, according to BLS data – this was a slower increase than March to April, when bacon prices jumped 3.4%.

Supply shortages and rising costs of pig feed were making pork products more expensive, Jayson L. Lusk, head of the Department of Agricultural Economics at Perdue, told the “Today” program in April.

The cost of other household staples has risen sharply, too. Over the past year, whole milk prices have risen 7.2%, beer 2.4%, and cigarettes 7.6%, the BLS data showed.

Whiskey has also climbed 3.7% in the past year, BLS data showed. It rose 0.7% from April to May, having fallen 0.2% in the previous month.

The overall consumer price index (CPI) rose 0.6% from April to May, and has surged 5% in the past year.

The monthly CPI jump was due mostly to a 7.3% rise in the cost of used cars and trucks, which accounted for about one-third of the seasonally-adjusted all items increase. Gasoline prices surged 56.2%, and car and truck rentals grew by 110% year-on-year.

As Insider’s Juliana Kaplan and Andy Kiersz reported, multiple under-the-radar signals suggest an inflation slowdown could be coming.

The 5% year-on-year inflation was the strongest since August 2008, and beat economists’ expectations. But annual price rises are measured against an unusually low base in May 2020, when most of the country was in lockdown.

The BLS figures showed that food away from home rose by 4% year-on-year. Restaurants are putting up the prices of menu items due to rising food costs and a labor shortage.

Read the original article on Business Insider

BlackRock’s Rieder says the Fed should begin rolling back ‘extreme policy accommodation’ as inflation data comes in hotter than expected

FILE PHOTO - Rick Rieder, BlackRock's Global Chief Investment Officer, speaks during the Reuters Global Investment Outlook Summit in New York City, U.S., November 14, 2016.  REUTERS/Brendan McDermid
Rick Rieder, BlackRock’s Global Chief Investment Officer, speaks during the Reuters Global Investment Outlook Summit in New York

  • BlackRock’s Rick Rieder doubled down on his stance the Fed should start pulling back on ultra-accommodative policy.
  • Rieder said Thursday’s inflation data shows prices are overwhelmingly high.
  • He said the Fed will be better served fulfilling its mandate if it begins discussing tapering.
  • See more stories on Insider’s business page.


BlackRock’s Rick Rieder doubled down on his stance that the Fed should consider rolling back its accommodative policy stance after key inflation data came in hotter than expected on Thursday.

CPI rose 5% year-over-year in May, higher than the consensus estimate of 4.7%. May Core CPI, which excludes volatile food and energy components, came in at 0.74% month-over-month and 3.8% year-over-year, well above the consensus forecast and driven higher by used vehicle prices.

The BlackRock chief investment officer of global fixed income said the data is just the latest sign that certain parts of the economy don’t have sufficient product inventory to supply the demand at current prices.

The Federal Reserve has suggested that some of the price gains are transitory, and therefore it will not be changing its policy stance until there is sustained inflation. Rieder, who is also the head of the BlackRock global allocation investment team, said that framework may need to change.

“Ongoing adherence to the newly minted Average Inflation Targeting (AIT) framework in the face of a torrid 2021 economic recovery that is visibly supply constrained, risks upending the very stability that the AIT framework claims to seek to achieve,” Rieder said.

The Fed would be better served in fulfilling its mandate to begin to discuss the tapering of asset purchase and to attempt to avoid the ” destabilizing influences that can result from excessive use of extreme policy accommodation,” he added.

Rider also said the inflation data out today is an “overwhelming” sign that prices are moving too high in some areas as demand grossly outpaces supply.

“In our view, the pursuit of inflation merely for inflation’s sake poses a very real problem: That problem is that inflation in daily necessities is disproportionately felt by lower-income cohorts,” said the CIO.

In an interview with CNBC on Monday, he said he is confident that the market is ready for the Fed to taper its asset purchases and remove “excessive emergency conditions” that have become a market risk.

Read the original article on Business Insider

Inflation fears are stoking volatility in stocks but they’re unlikely to derail the market rally, says UBS

NYSE traders
  • A jump in US inflation will stoke bouts of volatility in the stock market but it’s not likely to stop the overall rally, says UBS.
  • Consumer price inflation for April soared by more than expected, to a rate of 4.2%.
  • “We think that the reflation trade has further to run, UBS said Thursday.
  • See more stories on Insider’s business page.

US inflation rates are flying up and worries about an acceleration in prices ranging from airline tickets to energy have knocked stocks off their record highs, but those fears are unlikely to derail the overall rally in equities, wealth manager UBS said Thursday.

The “latest volatility does not come as a surprise. But we also don’t see it as signaling an end to the bull market,” Mark Haefele, chief investment officer of global wealth management at UBS, wrote to clients.

The arrival of April’s Consumer Price Index confirmed months of caution from economists who said stronger inflation was on the way, a reflection of ongoing economic recovery from the COVID-19 pandemic. The higher-than-expected headline and core inflation readings drove stocks sharply lower Wednesday.

Market pricing of the inflation outlook also stepped higher, said UBS, noting the US 10-year breakeven rate moved to imply an average inflation rate of 2.56%, close to the highest level since 2013 and up from 2% when 2021 got underway.

The CPI data triggered Wednesday’s selloff in stocks that left the S&P 500, the Nasdaq Composite, and the Dow Jones Industrial Average each down by at least 2%, with the Dow industrials tumbling 682 points.

“The latest rise in inflation, in our view, reflects year-over-year comparisons, which will fade,” he said. “While raw material prices may climb further, we believe the bulk of the rise in commodity prices is now over. In addition, labor supply headwinds should ease in the next few months once schools fully reopen, vaccinations continue to rise, and supplemental unemployment benefits expire.”

The CPI jumped to 4.2% from a year earlier, the largest increase since 2008, and core inflation, which strips out volatile energy and food prices, surged 0.9%, the largest one-month climb since 1982.

The UBS wealth management chief said it was important to note that major central banks have indicated they will not tighten policy in response to a temporary increase in prices. He outpointed that Federal Reserve Governor Lael Brainard said Tuesday the Fed will be “patient” as an inflation surge looks transitory.

“As inflation uncertainty persists, and as economic reopening remains on track, we think that the reflation trade has further to run. Our preferences include small-caps, financials, energy stocks, commodities, and emerging markets,” said Haefele.

Investors on Thursday appeared to set aside inflation worries, with Wall Street’s key stock indexes riding up roughly 1% each after weekly jobless claims hit another pandemic-era low.

Read the original article on Business Insider

Why the sudden spike in inflation won’t last long, according to economists

Michaels store
A shopper browses an aisle in a Michaels, an arts-and-crafts retailer, on March 03, 2021 in Miami, Florida.

  • Many economists expect inflation to cool as the US economy reopens despite April’s big jump.
  • Wednesday data showed prices climbing in March at their fastest rate since 2009.
  • Solving bottlenecks and hiring woes will help businesses catch up with the post-pandemic boom, experts said.
  • See more stories on Insider’s business page.

Reopening-fueled inflation has arrived.

The Consumer Price Index – a key gauge of nationwide price growth – leaped 0.8% in April, trouncing the median estimate of a 0.2% jump. The increase was the largest since 2009. The index that excludes food and energy prices rose 0.9%, and that was the largest one-month surge since 1982.

The data highlights that relaxed lockdown measures, stronger demand, and widespread supply shortages converged to boost price growth. More recent headlines, particularly news of a cyberattack crippling a key oil pipeline, suggest inflation will accelerate further in May.

But for many economists, the unexpectedly large April jump isn’t a reason to worry, and those with the greatest influence over inflation seem unperturbed.

The Federal Reserve has said for months that, while reopening will likely accelerate price growth, the pickup will likely be temporary. In February, Fed Chair Jerome Powell noted the decades-long trend of weaker-than-hoped price growth isn’t likely to be permanently overridden by months of reopening.

“Inflation dynamics do change over time, but they don’t change on a dime,” he said, adding stimulus passed during the pandemic is also unlikely to change the predominant trend.

Fed Vice Chair Richard Clarida echoed his colleague’s remarks after Wednesday’s report. The inflation data was a “surprise,” but inflation should still cool and trend near the Fed’s long-term goal of 2% by next year, he said in remarks to the National Association for Business Economics International Symposium.

“We have pent-up demand in the economy. It may take some time for supply to rise up to demand,” Clarida added.

That imbalance between supply and demand is one of the top culprits behind the April uptick. Factories warned throughout the month that bottlenecks, order delays, and huge backlogs were keeping firms from servicing a boom in consumer demand. Hiring woes also slammed manufacturers, leaving them unable to scale their production.

Addressing backlogs and lifting supply should help inflation cool over the summer, JPMorgan economists said in a recent note. Robust economic growth and continued policy support will drive more Americans into the workforce and bottlenecks, by their nature, will fade as businesses rush to service outsize demand, the team led by Bruce Kasman said.

In a separate note published Wednesday, the bank sais “temporary pressures” were lifting inflation, citing “commodity prices, bottlenecks, and price level normalization.” Once the economy returns to its full potential and shortages are alleviated, price growth should slow, the team added.

Even the nature of the inflation bounce suggests the price growth won’t last. One-third of the 0.8% boost was linked to a record-high increase in used vehicle prices as demand ran up against an inventory shortage. The rest of the increase was largely powered by other reopening-related expenses including airline tickets, recreation, and lodging.

It’s logical to expect demand for travel and leisure to normalize after booming through the reopening. Powell illustrated the limitation in March, noting one “can only go out to dinner once per night.” If long-shuttered businesses continue to drive faster price growth, it’s likely inflation will weaken once the country enters a new normal.

And the April report, while surprising, only shows one month of hot inflation. It would likely take a few more stronger-than-expected readings to worry Fed officials, Edward Moya, senior analyst at Oanda, said Wednesday.

“If the inflation numbers continue to surge at the end of the summer, that might be what could force Powell to pivot that pricing pressures might not be transitory.”

Read the original article on Business Insider