Inflation rose to its highest level since 2023 in April. What got pricier?

Americans already struggling with affordability saw prices rise again in April, as surging oil costs stemming from the Iran war kept driving up prices at the gas pump and impacted supply chains for other goods.

The Bureau of Labor Statistics' consumer price index, its measure of inflation, revealed prices rose 0.6% from March to April and were up 3.8% from a year ago. Those readings came in above forecasters’ expectations and mark inflation's highest level in nearly three years.

A 5.4% rise in gas prices over the month again drove the increase, following a record 21.2% spike in March. Over the year, gas prices are up 28.4%.

“American households continue to feel the brunt of surging energy costs, adding to the deluge of inflation they have weathered since the pandemic," James McCann, a senior economist of investment strategy at Edward Jones, said in a note to USA TODAY. "Moreover, with the Strait of Hormuz still effectively shuttered, the risk that we are not past the peak of these price pressures is rising."

The cost of energy, shelter, and food also increased over the month, while the price of new vehicles and medical care declined, the agency said.

While elevated gas prices are one of the fastest and most noticeable impacts of the war for consumers, John Groton, a sector lead for energy, materials and utilities at Thrivent, told USA TODAY supply chain disruptions for fertilizers, metals, and freight also risk driving up the cost of groceries, housing, and other consumer goods.

What is the core US inflation rate?

“Core” inflation, the BLS’ metric excluding more volatile energy and food costs, rose 0.4% in April, a bit more than it did in March or February, and it was a surprise to Principal Asset Management Chief Global Strategist Seema Shah.

"While the pickup in headline inflation was expected, the upside surprise in core is more consequential," Shah said in a note to USA TODAY. "It tentatively hints at broadening price pressures, something the Fed will be reluctant to dismiss."

Over the year, core inflation is up 2.8% ‒ underscoring once again how food and energy prices are driving the overall inflation figure higher.

Consumer sentiment bleak but spending resilient, for now

While the University of Michigan's measure of consumer sentiment hit another record low this week amid Americans' worries about surging costs, consumer spending has remained relatively resilient, driven by high-income earners in a K-shaped economy.

Low-income workers have started to pull back, according to Kory Kantenga, head of economics for the Americas at LinkedIn.

"We're still seeing growth in consumer spending, and the concern will be, if we start to see prices rise very sharply, does that change that dynamic?" Kantenga said. "That's really the backbone of resilience in the U.S. economy, and if that dynamic changes, then suddenly businesses need to rethink their growth plans, rethink their hiring plans."

How expensive is gas?

The national average price of a gallon of regular unleaded gas was $4.50 as of the morning of May 12, according to AAA. That’s up from $4.13 last month, and up from $3.14 one year ago. 

Most Americans hunting for cheaper gas haven’t found it. An April Numerator survey of car owners found 93% said gas prices rose in their area last month, and 72% reported cutting back on other spending to cover increases at the pump. 

SoLo Funds users may have cut back on spring shopping as a result. According to data from the community finance platform, apparel’s share of general-merchandise spending fell about 1.8% from February to March. It rose during the same period last year, signaling families may be forgoing new clothes to fill up their cars at the gas station. 

The company's data also shows how the K-shaped economy dynamic is showing up at the gas pump, according to SoLo Funds cofounder and President Rodney Williams.

"Higher-income households are largely absorbing the increase in gas costs through larger fill-ups, while more budget-conscious consumers are responding differently by buying smaller amounts of fuel, delaying purchases, or cutting back elsewhere," Williams said. "In many cases, consumers are not reducing discretionary spending because prices rose too much in those categories, but because energy costs are taking priority within already constrained household budgets."

President Donald Trump told CBS News on May 11 that he planned to suspend the federal gas tax to lower costs for drivers “for a period of time.” On the same day, Sen. Josh Hawley, R-Missouri, introduced legislation to suspend the tax, which costs consumers about 18 cents per gallon, for at least 90 days. Democrats in Congress previously introduced a bill in March that, if passed, would suspend the tax until October.

Are food costs still going up?

Shoppers may have noticed their grocery bills rise in April, as the BLS’ food at home index increased 0.7%, following a 0.2% dip in March. Over the year, they are up 2.9%. 

The agency’s index for meats, poultry, fish, and eggs climbed 1.3% over the month, as beef prices rose 2.7%. Fruits and vegetables got more expensive, rising 1.8%. Nonalcoholic beverages also got pricier, increasing 1.1%. Dairy and related products, as well as cereals and bakery products, saw slight price increases, too.

Hungry consumers also saw prices rise at restaurants in April, with the food-away-from-home index rising 0.2% over the month and 3.6% over the year, the BLS said.

Will the Fed adjust rates in June?

Federal Reserve policymakers, contending with risks to both sides of its dual mandate of stable prices and maximum employment, have stayed on the sidelines so far this year, and forecasters expect no rate change at their next meeting in mid-June.

In March, members of the rate-setting committee’s median expectation for rates at the end of 2026 implied one quarter-point cut before the end of this year. However, forecasters have also begun pricing in a rate hike as a possibility in response to a stable unemployment rate as well as positive job growth in March and April.

With Jerome Powell’s term as chair set to end May 15, senators are expected to soon confirm Trump’s pick to lead the central bank, Kevin Warsh, before the Federal Open Market Committee’s next meeting. While Warsh would have an outsized influence over the Fed’s monetary policy, he’ll still have just one vote of 12 on the committee. 

(This story was updated to add new information.)

Reach Rachel Barber at [email protected], and follow her on X @rachelbarber_