CNBC writes this morning that “inflation accelerated at its fastest pace in more than 12 years for April as the U.S. economic recovery kicked into gear and energy prices jumped higher, the Labor Department reported Wednesday.
“The Consumer Price Index, which measures a basket of goods as well as energy and housing costs, rose 4.2% from a year ago, compared to the Dow Jones estimate for a 3.6% increase … The increase in the headline CPI rate was the fastest since September 2008.”
CNBC also provides some context:
“In addition to rising prices, one of the main reasons for the big annual gain was because of base effects, meaning inflation was very low at this time in 2020 as the Covid-19 pandemic caused a widespread shutdown of the U.S. economy. Year-over-year comparisons are going to be distorted for a few months because of the pandemic’s impact.
“For that reason, Federal Reserve policymakers and many economists are dismissing the current round of numbers as transitory, with the expectation that inflation settles down later this year around the 2% range targeted by the central bank.
“Price surges also have come amid supply bottlenecks caused by a number of factors, from production issues with the ubiquitous semiconductors found in electronics products to the Suez Canal blockage in March to soaring demand for a variety of commodities.”
- KC’s View:
I’m no economist, but my initial reaction to this news – in fact, my reaction to every piece of economic news these days – is that the world in which we are living this year is very different than the world in which we were living last year. So comparisons of short-term results are not very instructive. But, if we start to see broader trends that last over a period of months and quarters, then we’ll have stuff to be concerned about.