INFLATION WATCH - getting higher ratings than ever!

Since war broke out in Iran and nearby parts of the Middle East, it's caused INFLATION WATCH to return with a vengeance. And what we saw from this week indicated we may be on the watch for a while.

The biggest number that typically gets attention on the inflation front is the Consumer Price Index, which kept pushing ahead for the second month where the effects of the “conflict” in the Middle East could be seen.

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.6 percent on a seasonally adjusted basis in April, after rising 0.9 percent in March, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 3.8 percent before seasonal adjustment.

The index for energy rose 3.8 percent in April, accounting for over forty percent of the monthly all items increase. The shelter index also increased in April, rising 0.6 percent. The index for food increased 0.5 percent over the month as the index for food at home rose 0.7 percent and the index for food away from home increased 0.2 percent.

The index for all items less food and energy rose 0.4 percent in April. Indexes that increased over the month include household furnishings and operations, airline fares, personal care, apparel, and education. Conversely, the indexes for new vehicles, communication, and medical care were among the major indexes that decreased in April.

The all items index rose 3.8 percent for the 12 months ending April, after rising 3.3 percent for the 12 months ending March. The all items less food and energy index rose 2.8 percent over the year, following a 2.6 percent increase over the 12 months ending March. The energy index increased 17.9 percent for the 12 months ending April. The food index increased 3.2 percent over the last year.

We knew that gas prices had moved higher, but notice the 0.7% increase in food at home – aka “groceries”, which are also up by 2.9% over the last 12 months. The last time groceries went up more than that in one month was the peak inflation days of Summer 2022, and the last time groceries were up by more than 2.9% in 12 months was in August 2023.

And the 0.4% increase in “core” inflation was the largest since the first month of Trump 2.0 in January 2025. Core inflation has never gotten down to the Federal Reserve’s alleged target of 2.0% in the last 12 months - and never has since Americans have been able to be vaccinated from COVID in early 2021. Also, the year-over-year increase in core prices is going up at the same 2.8% rate in April 2026 as it did in April 2025.

At the same time, we haven’t seen an increase in wages to go along with the increased costs that consumers are paying. Despite the kick up in inflation, average hourly wages only increased by 0.2% in both March and April, and average hourly wage growth over the last 12 months is less than it was in the 12 months before that.

Which means that real wages have had significant declines for March and April, and that followed 8 months of near-zero growth vs inflation.

From April 2025 to April 2026, real average hourly earnings decreased 0.3 percent, seasonally adjusted. The change in real average hourly earnings combined with no change in the average workweek resulted in a 0.2-percent decrease in real average weekly earnings over this period.

More alarming is that these CPI numbers and declining wagee growth are likely to get worse in the coming months. The next day there was another report that showed a big increase in April for the prices that businesses pay.

The Producer Price Index for final demand increased 1.4 percent in April, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. Final demand prices advanced 0.7 percent in March and 0.6 percent in February. The April increase is the largest advance since rising 1.7 percent in March 2022. On an unadjusted basis, the index for final demand rose 6.0 percent for the 12 months ended in April, the largest 12-month increase since moving up 6.4 percent in December 2022.

Nearly 60 percent of the April rise in final demand prices can be attributed to a 1.2-percent advance in the index for final demand services. Prices for final demand goods moved up 2.0 percent.

The index for final demand less foods, energy, and trade services increased 0.6 percent in April, the largest advance since rising 0.6 percent in October 2025. For the 12 months ended in April, prices for final demand less foods, energy, and trade services moved up 4.4 percent, the largest 12-month increase since jumping 4.5 percent in February 2023.

And if the increase in April’s prices for both consumers and producers is largely related to rising gasoline and transportation prices, that isn’t going to go bn away any time soon. Nationwide gas prices have gone up another 10% in the last month, and it’s even worse in our part of the country, with Wisconsin’s gas prices now exceeding the national average of $4.52 a gallon, and up by nearly 80 cents vs mid-April.

And the bond market has been taking notice. Take a look at these charts of the 10-year Treasury Note and 30-year Treasury Bond over the last month.

That’s what happens when the bond market doesn’t believe that prices are coming down any time soon, nor do they think that the doddering fool in the White House and the Fox News clowns that surround him will have a clue on how end hostilities in the Middle East, or do anything to get budget deficits under control.

And if the Fed gets the hint and raises interest rates in the coming months to try to slow down price hikes and rampant Wall Street Bubbling and gambling, watch for the heads to explode in TrumpWorld. But they’ll only have themselves to blame with an inflation that had been tamed by the 2024 elections, but now seems to be breaking containment in 2026.