Consumer Prices Jump 4.2% In April, Biggest Increase Since Financial Crisis In 2008
MARY LOUISE KELLY, HOST:
It's true - prices are going up on lots of things, from coffee to computers to cars. Last month, prices surged a whopping 4.2% from a year ago. That's according to the latest government data out today. And it could spell trouble for the U.S. economy. NPR's David Gura joins us now. Hey, David.
DAVID GURA, BYLINE: Hey, Mary Louise.
KELLY: All right. Let's talk about what is getting more expensive. Where did we see the biggest price increases?
GURA: I should say first, overall, this is the largest increase we have seen in CPI, the consumer price index, since 2008, back during the financial crisis. And CPI captures what you and I pay for the things that we buy. You mentioned cars. Something that really stands out is used cars. Prices were up a whopping 21% from a year ago. And CPI has been around since 1953. We have never seen used car prices spike like we saw them spike today. And a big reason for that is new cars have gotten really hard to find because of a shortage of semiconductor chips that go into cars. There's a shutdown of many auto factories.
Looking at the numbers today, what else has gotten more expensive? Fresh fruit, oranges in particular, also lettuce, bacon. Prices are up across the board, really, with only a few exceptions. And gasoline is up about 50% from last year, back when there weren't as many of us driving our cars because of the economic shutdown.
GURA: I should say, the latest cyberattack is not going to be good news for gasoline prices as well.
KELLY: Yeah. No, I was going to say there are plenty of gas stations around the country where you will be lucky to find gas to pay more money for right now. How much of this has to do with the pandemic?
GURA: A ton. I mean, we've been spending much more time at home, so people are buying nicer furniture. Those prices went up. TVs have gotten more expensive, so has audio equipment. People are remodeling, adding onto their homes, and that demand has made building supplies more expensive. Mitch Wagner is the president of purchasing at 84 Lumber. That's a family-owned company based in Pennsylvania but does business in around 30 states in this country. He says the price of wood is almost four times what it was a year ago. But interestingly, so far, most of his customers have been willing to pay more.
MITCH WAGNER: They weren't vacationing. They weren't dining out, so their money was going into their home because that's where they were.
GURA: Now, today's data also reflect how the economy is reopening. There is this desire to travel. The price of plane tickets went up more than 10% from March to April. Hotel rooms have gotten more expensive. And the cost of car rentals, that is up more than 16%.
KELLY: So I guess my question is, do we know if these higher prices will stick? Or are they permanent or maybe a blip as we hopefully turn the corner on the pandemic?
GURA: That is the key question - is this inflation or a price pop? And, as you said, many of us are probably just noticing these prices going up. But what we've been hearing from many economists and from the head of the Fed and the Treasury Department is that this is going to be temporary. Prices are up because there's more demand and supply, and things are going to even out here eventually.
And there's a school of thought that many consumers have a cushion to deal with these price increases because they've gotten these direct payments from the federal government. But if this continues for months, if it becomes a trend, it's going to weigh on consumers and pressure is going to build on policymakers. Question is going to become, will the Fed react by raising interest rates? And policymakers have said they have no plans to do that. Then, of course, there's the politics of this. Republicans using today's number to argue against another spending bill.
KELLY: And, real quick, how are the markets responding?
GURA: A lot of concern on Wall Street, investors very worried about this, about inflation and what the response is going to be. We certainly saw that in the markets today. A sharp sell-off, stocks down for the third day in a row. The Dow closing down 680 points, back to where it was in January. Yes, there's a tendency for investors to focus on the short term, but some real concern here that the Fed is saying the right thing but might not be able to deliver on what it's promising, Mary Louise.
KELLY: NPR's David Gura, thank you.
GURA: Thank you. Transcript provided by NPR, Copyright NPR.