Daily Management Review

US consumer prices in April show the strongest increase since 2008


US consumer goods prices rose by 4.2% in April compared to the same period in 2020. Such data was published by the US Department of Labour. It is the most significant monthly increase in prices since September 2008. Analysts polled by Dow Jones had expected prices to rise by 3.6%.

Daniel Christensen
Daniel Christensen
The increase in consumer prices is linked to the recovery of the US economy with the expansion of vaccination, the removal of a number of restrictions and broad government support, as well as the increase in prices of some goods due to supply disruptions. In addition, it should be borne in mind that last April was the height of the first lockout, when demand for many goods declined and inflation was unusually low. 

In calculating the Consumer Price Index, prices for a range of goods and services are taken into account, including food, clothing, cars, dining out, etc. Energy prices showed particularly strong increases, up 25% year-on-year, and used car prices, up 10%, due to a memory chip shortage that is causing declines in car production around the world.

Investors reacted negatively to the release of data confirming their fears of high inflation in the USA, with the Dow Jones down 1.46%, the S&P 500 down 1.6% and the NASDAQ down 2.25% on Wednesday. Earlier in the day all US major indices also showed significant declines, it was also due to fears of high inflation. 

Investor concerns were triggered by the release of data on one of the key indicators, the five-year breakeven rate, which came close to its highest level since 2011. At the same time, Fed officials and some experts believe that there is no cause for concern so far: in their view, this increase in prices is temporary and is caused by last year's low figures, and by the end of this year, inflation will stabilize at 2%. 

source: bls.gov