(Bloomberg) – The cost of living in the U.S. climbed in April by the most in three years an indication that inflation may be picking up toward the Federal Reserve’s goal.
Consumer prices increased 0.4 percent, the biggest gain since February 2013, following a 0.1 percent advance in March, a Labor Department report showed Tuesday in Washington. The so-called core measure, which strips out food and energy costs, rose 0.2 percent after a 0.1 percent gain the prior month.
The biggest jump in gasoline prices in almost four years is leading a rebound in fuel costs that is laying the groundwork for overall inflation to climb higher, while a slight weakening in the dollar will support a pickup in core prices to a level near the Fed’s 2 percent target. A strengthening job market is also helping boost pay, which may prompt companies to raise prices to prevent profits from weakening.
“We’re seeing budding, but by no means in full bloom, inflation,” said Stuart Hoffman, chief economist at PNC Financial Services Group Inc. in Pittsburgh, Pennsylvania, who correctly forecast the increase in consumer prices. “Some of that is just a reversal of the huge fundamental decline in oil and gasoline that we’ve seen, and the other part is the service side of the economy.”
Economists expected total prices to rise 0.3 percent from the month before, according to the median Bloomberg survey estimate of forecasts that ranged from advances of 0.2 percent to 0.7 percent. The CPI climbed 1.1 percent in the 12 months ended April after rising 0.9 percent in the previous period.
The increase in core prices matched the median estimate of economists surveyed. Projections ranged from no change to a gain of 0.3 percent. At a year-over-year rate, core prices rose 2.1 percent in April after climbing 2.2 percent the prior month.
The report showed energy costs increased 3.4 percent from the prior month, the most since February 2013. Gasoline jumped 8.1 percent, the most since August 2012.
The nationwide average cost of a gallon of regular gasoline has climbed in all but two of the past 13 weeks, reaching $2.22 as of May 15, according to AAA, the biggest U.S. motoring group.
Food prices increased 0.2 percent in April after a 0.2 percent decline the month before.
The core index was boosted by increases in rents, medical care, auto insurance and airline fares. Declines in costs of household furnishings, clothing and new and used cars held back the gain.