U.S. consumer prices rose 3.8% over the 12 months ending in April, the fastest annual pace since May 2023, as energy costs tied to the war with Iran continued to drive inflation higher.
April's monthly CPI reading of 0.6% on a seasonally adjusted basis was in line with forecasts, the Bureau of Labor Statistics reported Tuesday, though the 3.8% annual figure came in a tenth of a percentage point above the Dow Jones consensus and exceeded March's reading by half a percentage point.
A 3.8% jump in the energy index drove much of the overall increase, pushing the 12-month energy gain to 17.9% and accounting for more than 40% of the total monthly rise across all categories. Gasoline prices were up 28.4% compared with a year earlier.
Food prices rose 0.5% for the month, putting the annual food index at 3.2%. The index for meats, poultry, fish, and eggs increased 1.3% in April, with beef up 2.7%. Fruits and vegetables gained 1.8% over the month.
Stripping out food and energy, April's core reading came in at 0.4% for the month and 2.8% year over year — still well north of the Fed's 2% target. Among other categories, shelter added 0.6%, airline fares jumped 2.8% and are now up 20.7% for the year, and both apparel and household furnishings and operations posted gains of 0.6% and 0.7%, respectively. Modest relief came from new vehicles, which dipped 0.2%, and medical care, which edged down 0.1%.
After accounting for inflation, workers' average hourly earnings dropped 0.5% in April and turned negative on a 12-month basis — down 0.3% — marking the first time since April 2023 that purchasing power has eroded on an annual basis, according to data cited by CNBC and CNN.
Tightened global oil supplies tied to the conflict have pushed pump prices to levels not seen since July 2022, rippling through supply chains that depend on diesel-powered freight, according to CBS News. In a phone call with CBS News on Monday, President Trump announced plans to temporarily waive the federal gasoline levy — set at 18.4 cents per gallon for regular fuel and 24.4 cents for diesel — although analysts cautioned that the relief motorists would actually feel could be modest.
Even a swift resolution to the conflict would not prevent inflation from continuing to rise through the summer, Moody's $MCO Analytics chief economist Mark Zandi told CBS News — with the annual rate unlikely to retreat below 3.3% until late in the year. Zandi added that war-driven energy costs would feed through into food and consumer goods that rely on diesel freight to reach store shelves.
Heather Long, chief economist at Navy Federal Credit Union, said the situation represented a meaningful reversal for working Americans. "Inflation is the key drag on the U.S. economy now," she told CNBC. "For the first time in three years, inflation is eating up all wage gains. This is a setback for middle-class and lower-income households."
Tuesday's data further complicates the path for the Federal Reserve, which has left borrowing costs unchanged throughout the year. CNBC reported that incoming Fed Chair Kevin Warsh, a proponent of rate reductions, now faces a harder case to make given the energy-fueled price acceleration.