From gas to groceries, consumer prices soared to historic highs in April

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Consumer prices for the month of April rose the most since September 2008, an indication of soaring demand dovetailing with continued supply chain interruptions, according to the latest monthly data released Wednesday by the Bureau of Labor Statistics.

The Consumer Price Index, a measurement of price changes for items ranging from food to clothing to pet products, jumped by 0.8 percent in April, beating expectations of 0.2 percent, or 2.3 percent year over year.

Car sales led the surge, with used cars and trucks rising by 10 percent in April, the largest month-to-month increase in the index's history. Housing, airlines, recreation, motor vehicle insurance, and household furnishings also contributed to the overall increase, the agency said.

The food index rose sharply as well, rising by 0.4 percent for both home-cooked meals and dining.

The Federal Reserve has kept interest rates at rock bottom lows, but were inflation to rise above its current 2 percent target, central bank officials could vote to increase its benchmark borrowing rate. That would mean a higher cost of lending, raising prices on everything from car loans to mortgages, during a time when both affordable cars and houses are in shorter supply. That could threaten to trip up the nation's economic recovery.

Specific metro areas are seeing price hikes higher than the national average, based on local conditions.

NBC News is tracking the monthly changes in key grocery items through a tracker updated monthly.

A pound of bacon jumped 5.5 percent in the Atlanta, Miami and West Palm Beach metro areas, according to data from NielsenIQ, which monitors real prices paid at checkout at major grocery chains.

Chicken breast prices surged by more than 6 percent in Los Angeles and the Miami and West Palm Beach metro areas, and over 5 percent in Dallas, where it is up nearly 12 percent from a year ago.

“We continue to see popular grocery items changing prices locally more than they change prices nationally,” Phil Tedesco, vice president for retail intelligent analytics at NielsenIQ, said in an email. “It seems likely that supply chain and logistics are the cause of localized price pressures, rather than national price increases.”

Several factors are driving meat prices higher this spring. Low cattle prices in 2020 encouraged ranchers to trim herds, reducing the number of cows by about half a million from their 2019 peak. Pork has rallied on strong Chinese import demand following outbreaks of African swine flu among local farms. Higher grain prices following winter weather that slashed crop yields are also pushing up prices, along with rising U.S. consumer demand as grilling season kicks off and more diners return to restaurants.

Grocery prices have been on the rise since the pandemic lockdowns hit last spring, spurring shoppers en masse to conduct weeks of shopping in single trips, emptying shelves and backup warehouses. Production lagged as manufacturers coped with their own shortages of supplies, workers and drivers. The combination of demand spikes and production dips sent grocery prices soaring. Supply chains are still reeling and repairing.

Other goods have also seen increases, like baby and paper products. Lumber, copper, and steel prices have fresh highs on the back of a home building and renovation boom. A global computer chip shortage has severely impacted manufacturing in several key industries, raising prices for cars, electronics, and household appliances.

Buoyed by stimulus checks, consumer spending and confidence has been increasing. But the shift in consumption patterns away from restaurants and retail stores to cooking at home and ordering online has stressed already snarled supply chains. Distribution channels are coping with everything from a shortage of truck drivers to a dearth of shipping containers going back to China.

New car prices are zooming this spring with inventories and incentives low and demand high. The average new car price is over $40,000, according to Kelly Blue Book, an increase of more than 4 percent from a year ago.

Gas has also soared on tight inventories meeting rising demand on the vaccination boom, with the national average nearing $3 a gallon. And that was before a ransomware cyberattack on the crucial East Coast artery of the Colonial Pipeline pinched supplies for a week, nudging up prices by as much as 6 cents, spurring a wave of panic pumping and sporadic gas station outages in some southern metro areas.

White House economists have warned that while inflation appears to be spiking now, the rate of increase should soon settle down to a slower and steadier pace.

“We think the likeliest outlook over the next several months is for inflation to rise modestly… and to fade back to a lower pace thereafter as actual inflation begins to run more in line with longer-run expectations,” Jared Bernstein, a member of the Council of Economic Advisers; and Ernie Tedeschi, a senior economist on the council, wrote in April.

The jumps also appear sharper because they are coming from a lower level. One of the long-term focuses of the Federal Reserve has been to use interest rates to control inflation.

At the start of the pandemic, the Fed dropped its benchmark interest rate to zero, and began an aggressive program of bond-buying intended to keep money flowing through the economy. Fed Chairman Jerome Powell and other officials have said they don’t plan to pull back or withdraw this support any time soon, even as indications of inflation have begun to crop up as the economy recovers.

"We want inflation to run a little bit higher than it's been averaging in the last quarter century. We want it at 2 percent, not 1.7 percent," Powell said in April.

That will mean letting inflation heat up a little more to thaw the economy. The Fed has said that rising inflation reflects “transitory factors.”

Higher inflation can hurt the poorest sectors of the community, whose income and wages don’t rise as fast to keep pace, already struggling to both put food on the table and keep a roof over their heads. For instance, some lower income minority populations have been hit harder by rising food prices.

“I don't even understand why they're rooting for inflation, it hurts the poor, it hurts the lower income,” influential investor Stanley Druckenmiller, president of Duquesne Capital, told CNBC Tuesday. “The people that are going to get hit the hardest are kids in Harlem, and the lower income brackets, not the wealthy.”

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