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It Appears Inflation Is Making A Comeback


As the U.S. economy reopens, prices have been going up, which makes economists types worried about higher inflation, something we haven't seen in years. One tool economists use to measure that is the CPI, the Consumer Price Index. And the new data out this morning shows that prices were up 4.2% in April from a year earlier. NPR's David Gura has been tracking this, and he joins us now. Good morning, David.


MARTIN: All right. So this new data is out this morning. What does it tell us?

GURA: Yeah. Let me just say first, this is the biggest increase we've seen since the 2008 financial crisis. And it confirms what you may have noticed at the supermarket, that the stuff you buy has started to get more expensive from bacon to bread and paper towels.


GURA: Keep in mind, this number compares this April to April of 2020. It was a whole different world then, of course. The global economy had shut down. Now the economy is reopening, and that's really what's behind this spike. Businesses are having a hard time keeping up with demand, so they're raising their prices, and hiring has gotten difficult. On top of that, interest rates are extremely low, and there've been trillions of dollars in government spending. So a few things stand out from this report from the numbers we got this morning. Big price increases in travel - hotel rates up 7.6% from March to April. Airfare is up more than 10%. There is still a lot of demand for used cars and used trucks. Supply chain issues have made it really hard to make new cars. Prices for used cars up 10% from March to April. That is the largest increase, Rachel, we have seen since the year 1953.

MARTIN: Wow. So what does this mean writ large for the economy?

GURA: Yeah. This could get tough for consumers, especially for low-wage workers. We're in the middle of a recovery, but millions are out of work. They're still struggling. And if this were to continue, the Fed Reserve could decide to raise interest rates sooner than it said it will. Right now, rates are near zero, and economists expect they're going to stay there for a couple more years. What the Fed wants to see is for inflation long term to be around 2%. I talked to William Lee. He's the chief economist at the Milken Institute. And he says look at today's number in a broader context.

WILLIAM LEE: The one thing economists always try to do is distinguish between a price pop and inflation.

MARTIN: Explain that.

GURA: Well, a price pop is a temporary spike. But inflation is a steady rise in prices and wages that last. So it's a nuanced thing but an important thing. And the Fed chair, he thinks this is a price pop, so does the treasury secretary. They argue that prices are going to come back down when supply and demand come back into balance. I should say opponents of President Biden's latest spending plan are already using today's number to argue against more government spending.

MARTIN: Any reaction from Wall Street to this news?

GURA: Yeah. Investors watching this very closely, trading started, stocks are down this morning. They were pointing down before the bell opened. Look, the market has been setting records, and there is fear that inflation could end a record-setting run. You know, shifting to businesses, big companies have been setting all kinds of records - record sales, record profits. But we've heard from their executives about supplies getting more expensive. So they've been wrestling with what to do about that. Are they going to cut costs or are they going to try to absorb these price increases or is this something they're going to pass on to consumers? And indeed many companies have already decided to do that.

MARTIN: So I don't know about you, David, but a year of living in lockdown pandemic era has meant that a lot of my appliances are just done, right? Like, my dishwasher needs to be replaced, my laundry machine. Are these things going get more expensive as a result of all this?

GURA: Yeah. Manufacturers have said that they're going to raise prices on appliances, and we're hearing that if prices keep going up, you know, there is this argument made by some economists that consumers will be willing to pay these higher prices because they've received these direct payments from the federal government. One thing else I'll be paying attention to is wages. We've been seeing these record profits as I mentioned. They've been going up, but wages have not been going up, and now employers are having to offer incentives to attract new workers.

MARTIN: NPR's David Gura. We appreciate it. Thanks.

GURA: Thanks, Rachel. Transcript provided by NPR, Copyright NPR.

Rachel Martin is a host of Morning Edition, as well as NPR's morning news podcast Up First.
David Gura
Based in New York, David Gura is a correspondent on NPR's business desk. His stories are broadcast on NPR's newsmagazines, All Things Considered, Morning Edition and Weekend Edition, and he regularly guest hosts 1A, a co-production of NPR and WAMU.
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