Gas, Groceries and Energy Send Inflation to a Fresh 2023 High

NBC News, Reuters, CNBC, and the Wall Street Journal contributed to this report.

Inflation heated up again in April, and this time it moved faster than wages. Consumer prices rose 3.8% from a year earlier, the biggest annual jump since May 2023, while average hourly earnings were up 3.6%, according to the latest Labor Department data. In plain English: paychecks are no longer keeping up.

The biggest culprit was energy. The Bureau of Labor Statistics said energy prices rose 3.8% in April and accounted for more than 40% of the month’s overall increase. Gasoline alone climbed 5.4% for the month, while electricity and fuel oil also moved higher.

That pressure is already spilling into other parts of the basket. Food at home rose 0.7% in April, the largest monthly jump in nearly four years, while airfares were up 20% from a year ago. The broader monthly CPI rose 0.6%, and core inflation, which strips out food and energy, increased 0.4% – a little hotter than economists expected.

The backdrop is familiar by now: the Iran war has kept oil and gasoline prices elevated, and that’s feeding into transport costs, jet fuel, and eventually more consumer prices. Reuters reported that oil was up more than 70% from the start of the year, with average gas prices around $4.50 a gallon, while analysts warned the full effect of higher energy costs still hasn’t fully shown up in core goods.

For the Federal Reserve, this is another awkward data point. Inflation is still well above the Fed’s 2% target, and markets are now betting the central bank stays put for longer – maybe a lot longer.