Gasoline prices are up more than 20% from a year ago and food prices have risen 5%, but inflation was fairly mild last month, the government reported Wednesday.
If that comes as a shock to you, you're not alone. Economists say the consumer price index's 0.2% increase in April was more a fluke than an accurate snapshot of the economic conditions encountered by most Americans.
The data released by the Labor Department "weren't worth the paper they were printed on," said Scott Anderson, senior economist with Wells Fargo & Co. in Minneapolis. "We expect a stinging rebuke to this in May, when we expect a significant jump in the index."
Such a view didn't stop Wall Street from delighting in the report. The Dow Jones industrial average surged as much as 160 points before retreating during a late sell-off in technology stocks. The blue-chip average finished up 66.20 points, or 0.5%, at 12,898.38.
Even the Labor Department seemed to recognize that the figures would strike most people as counterintuitive at best and went to great lengths to explain why its report said prices at the gas pump actually fell 0.2% last month. The reason: The consumer price index is seasonally adjusted.
"Gasoline prices rose in April but they didn't rise faster than they usually do in April," said Peter Kretzmer, senior economist at Bank of America Corp. "This doesn't deny the fact that energy prices are up by double digits from last year, so people are correct in believing that the cost of gasoline has skyrocketed."
The department's figures did include a 0.9% jump in food and beverage prices in April. It was their biggest one-month increase since 1990 and put them up 5% compared with April 2007.
Higher transportation costs caused by record fuel prices were a probable contributor to the surge in food costs, economists said.
Fruit and vegetable prices rose 2%, followed by beverages, which climbed 1.7%, and cereal and bakery goods, which were up 1.4%.
One reason the overall consumer price index may not jibe with consumers' experience is that it does not account for short-term changes in consumption patterns, said economist Joel Naroff, who runs a consulting firm in Holland, Pa. For instance, the prices of new automobiles and personal computers declined significantly in April.
"But for the average household that may not be buying a car this year, those declines don't mean a whole lot," Naroff said.
In fact, most consumers are probably reducing their discretionary spending, Wells Fargo's Anderson said.
"There is some substitution going on," he said. "People are buying the necessities, food and gas, and cutting back on other things."
When food and energy costs are excluded, consumer prices rose just 0.1% in April -- about half of what economists expected. Economists said that probably reflected reduced consumer demand in a slowing economy. The government has estimated that the economy grew at a 0.6% annual rate in the first three months of the year.
The Federal Reserve won't be fooled by April's apparently tame inflation, economists said. The central bank has slashed its key interest rate by 3.25 percentage points since the summer to stimulate the economy but has hinted that it might pause the rate-cutting campaign to avoid fueling inflation further.
"I doubt this report will persuade anyone at the Fed that inflation is not a threat," Naroff said.
Bank of America's Kretzmer had a similar view.
Although Wednesday's inflation report will "make the Fed feel a bit better about where they are," he said, "I think they still feel like rates are low and they aren't in a hurry to do more."
Or, as Anderson put it, "Enjoy the good news while it lasts, because it's not going to last very long."