Prices rise in the United States: annual inflation in April was 4.2%

The rise in the Consumer Price Index was much stronger than expected and could fuel fears that the economy will overheat.

Used cars, airline tickets and furniture registered strong price increases in the United States in April in a context of higher inflation than expected, which could complicate the adoption of the gigantic investment plan promoted by President Joe Biden.

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It has been 13 years since prices have risen that much: in the 12 months to last April, the increase was 4.2%, according to the CPI index published on Wednesday by the Labor Department.

A year ago, the collapse in demand due to the effect of containment measures to combat the coronavirus pandemic, caused prices to fall, thus creating a disproportionate comparison effect, on a very low basis.

However, the much stronger-than-expected price hike published on Wednesday could fuel fears that the economy will overheat, which would be a new obstacle for Biden.

The president recently presented two different plans: a “project for families” for US $ 1.8 trillion of spending in 10 years, and an infrastructure plan of US $ 2 trillion in eight years.

If inflationary pressure is long-lasting, the Federal Reserve may consider adjusting its rates upward, which could affect credit and investment. Fed Chairman Jerome Powell repeatedly indicated that the inflationary phenomenon would be temporary and that full employment should be reached before the body considers raising interest rates.

Price “normalization”

Inflation also rose month by month, 0.8% in April compared to March, driven by a series of factors: expenses increased thanks to vaccination, which allows greater mobility, and the aid of the latest government stimulus plan, approved in March.

At the same time, there are global sourcing difficulties for the industry, pushing prices up from manufacture to delivery.

“Part of the increase is due to a normalization of prices in some sectors hard affected by the pandemic”, highlighted the economic advisers of the White House in a tweet, citing “the fares of the airlines (which) increased 10.2% in a month, but (…) they are still well below their pre-pandemic level ”.

The question is whether this price increase, which will continue in the coming months, will last or not. “I was surprised. These figures are much higher than what I expected and the analysts’ forecasts, ”acknowledged the Fed’s number two, Richard Clarida, during a virtual conference.

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The official expects inflation to stabilize in 2022 near the central bank’s 2% target.

Many companies increase prices, or plan to increase them. The Whirlpool group will increase its household appliances from 5% to 12%, while Coca Cola will sell containers with less content, at the same price.

Low on gasoline

In April, the prices of used cars in particular soared, to the point that they represent a third of monthly inflation.

Is that Americans, adept at teleworking, continue to abandon urban centers and that leads to buying several vehicles, while in parallel the shortage of semiconductors reduces the production of new cars.

Prices for hotels, airfare, leisure services, auto insurance and furniture also rose, according to the Labor Department. On the other hand, gasoline prices, which pushed inflation in recent months, fell 1.4% over March.

The result: excluding highly volatile food and energy prices, underlying inflation is 0.9% in one month – the highest increase since April 1982 – and 3% in one year.