US Consumer Prices Are Rising At Their Fastest Pace In 3 Years

Bearing in mind the one-off impact of BLS correcting for shutdown-related distortions (in rent/shelter) from last October., this morning's CPI was expected to come in hot as the impact of the Iran war starts to spread (energy, airfares, transport) and the melt-up in memory costs (unrelated to war) as the token wars continue.

As a reminder, March saw headline CPI in line (energy) while Core CPI actually printed cooler than expected. and we suspect most attention will be on the Core side again today with investors 'looking through' short-term energy-driven cost pressures.

Headline CPI rose 0.6% MoM (as expected), pulling headline up 3.8% YoY (hotter than the 3.7% expected) and the hottest since May 2023...

Source: Bloomberg

Energy and Food costs dominated the rise in headline CPI along with Core Services...

Source: Bloomberg

CPI highlights:

MoM energy rose 3.8% in April, accounting for over forty percent of the monthly all items increase. The shelter index also increased in April, rising 0.6%. The index for food increased 0.5% over the month as the index for food at home rose 0.7% and the index for food away from home increased 0.2%. YoY CPI energy index increased 17.9% for the 12 months ending April. The food index increased 3.2% over the last year.

CPI Food:

• The index for food rose 0.5% in April after being unchanged in March. The food at home index increased 0.7% over the month.
• Five of the six major grocery store food group indexes increased in April. The index for meats, poultry, fish, and eggs increased 1.3 percent over the month as the index for beef rose 2.7 percent.
• The fruits and vegetables index increased 1.8% in April and the nonalcoholic beverages index rose 1.1%.
• The index for dairy and related products increased 0.8% over the month and the index for cereals and bakery products rose 0.1% in April.
• In contrast, the index for other food at home fell 0.4% in April after being unchanged in March.
• The food away from home index rose 0.2% in April.
• The index for limited service meals rose 0.4% over the month and the index for full service meals rose 0.1 percent.

CPI Energy:

• The index for energy increased 3.8% in April, after rising 10.9% in March. The gasoline index increased 5.4% over the month. (Before seasonal adjustment, gasoline prices increased 11.1% in April.)
• The index for electricity rose 2.1% in April. The fuel oil index increased 5.8% over the month.
• Conversely, the index for natural gas decreased 0.1% over the same period.

New- and Used-Vehicle prices remain stable as Shelter jumped (as expected)...

On a short-term annualized basis, it's all about Energy...

But, the surge in the Energy subcomponent of CPI is perhaps peaking as oil has stabilized/eased. 

Source: Bloomberg

Core CPI rose more than expected in April (up 0.4% MoM vs +0.3% exp), pulling the YoY rise in prices up by 2.8% (also hotter than expected).

Source: Bloomberg

While that is the highest since Sept 2025, it is clear that whatever impact the war is having, it is not spreading wildly into the broad market... yet.

However, Core Services dominated the price rises (perhaps some energy cost impact pull-through)...

Closer look at Core CPI which rose 0.4% in April, after rising 0.2% in each of the 2 preceding months.

• The shelter index increased 0.6% over the month.

  • The index for owners’ equivalent rent and the index for rent both increased 0.5% in April.

  • The lodging away from home index rose 2.4% over the month.

• The index for household furnishings and operations increased 0.7% over the month, after rising 0.2% in March.

• The airline fares index rose 2.8% in April and the personal care index rose 0.7%.

• The index for apparel rose 0.6% over the month and the index for education rose 0.2% in April.

• The recreation index and the motor vehicle insurance index each increased 0.1% in April.

• The new vehicles index and the communication index each declined 0.2% in April.

• The index for used cars and trucks was unchanged over the month.

• The medical care index decreased 0.1% in April, after falling 0.2% in March.

  • The index for hospital services decreased 0.3 percent over the month.

  • Conversely, the physicians’ services index increased 0.6 percent over the month while the prescription drugs index was unchanged in April.

CPI Core rose 2.8% YoY: the shelter index increased 3.3% over the last year. Other indexes with notable increases over the last year include medical care (+2.5 percent), airline fares (+20.7 percent), household furnishings and operations (+3.9 percent), and recreation (+2.3 percent).

Here's the one time CPI adjustment in shelter:

Rent Inflation +0.49% in April after 0.16% in March; biggest monthly increase since Oct 2023; 
Rent inflation +2.79% YoY, up from 2.56% in March and highest since January 2026

Shelter inflation 0.61% in April after 0.40% in March, biggest monthly increase since Jan 2024;
Shelter inflation +3.30% in April, up from 3.02% in March and highest since Oct 2025.

Perhaps most notably, Real Wages are shrinking on a YoY basis (for the first time since April 2023)...

Finally, are we really ready for a 70s-style rebound in inflation?

Bonds may be hinting but stocks certainly are not, even as consumer sentiment hits rock bottom.