Inflation from Economic Reopening is Here


Both headline inflation and core inflation jumped in April, reflecting strong consumer demand for products and services as the economy reopens from the COVID-19 recession.

The Bureau of Labor Statistics (BLS) reported that the Consumer Price Index (CPI) rose by 0.8% in April on a seasonally adjusted basis, after an increase of 0.6% in March. It marks the largest increase since June 2009. Excluding the volatile food and energy components, “core” CPI increased by 0.9% in April, after an increase of 0.3% in March. It is the largest increase since April 1982. The index for used cars and trucks increased by 10.0% in April, accounting for over a third of the seasonally adjusted all items increase. Meanwhile, the indexes for shelter (0.4%), medical care commodities (0.6%), apparel (0.3%), and airline fares (10.2%) all rose over the month.

The price index for a broad set of energy sources declined by 0.1% in April, after ten consecutive increases from June 2020 to March 2021. While energy commodities decreased by 1.4%, energy services increased by 1.5%. The food index rose by 0.4% in April, after a 0.1% increase in March. The indexes for food at home and food away from home rose by 0.4% and 0.3%, respectively.

During the past twelve months, on a not seasonally adjusted basis, the CPI rose by 4.2% in April, the biggest 12-month increase since September 2008. Meanwhile, the “core” CPI increased by 3.0% over the past twelve months, faster than a 1.6% increase in March. The food index rose by 2.4% and the energy index rose by 25.1% over the past twelve months.

NAHB constructs a “real” rent index to indicate whether inflation in rents is faster or slower than overall inflation. It provides insight into the supply and demand conditions for rental housing. When inflation in rents is rising faster (slower) than overall inflation, the real rent index rises (declines). The real rent index is calculated by dividing the price index for rent by the core CPI (to exclude the volatile food and energy components).

In April, the Real Rent Index declined by 0.7%, after a 0.2% decrease in March. Over the first four months of 2021, the monthly growth rate of the Real Rent Index declined by 0.2%, on average.

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1 reply

  1. Is reopening the cause or the drastic increase in money supply as Washington pours trillions into the economy? If you look at the causes of the 1979 inflation debacle you will see the cause was M-1 money supply. You may also learn that 30 year fixed rate mortgages were 18% or higher and few lenders were in the market. It caused the acceptance of the ARM mortgage. It’s helpful to study and learn history as that may help in avoiding past mistakes.

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