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A used car dealership is seen in Laurel, Maryland on May 27, 2021, as many car dealerships across the country are running low on new vehicles as a computer chip shortage has caused production at many vehicle manufactures to nearly stop.

Jim Watson | AFP | Getty Images

Price increases in used cars, car rentals — as well as a rebound in airfares, lodging and food — are behind the biggest inflation surge since 2008 as the U.S. economy reopens.

The consumer price index jumped 5.4% from a year earlier, the largest increase since before the worst of the financial crisis, the Labor Department reported Tuesday. Excluding the volatile food and energy categories, inflation increased 4.5%, the largest move since September 1991. On a monthly basis, headline and core prices rose 0.9% against 0.5% Dow Jones estimates.

Looking at item-level data provided by the Bureau of Labor Statistics, prices of used cars and car rentals led the increase in overall prices. The pandemic kept many Americans home last summer, but car rental and sale prices have skyrocketed as many consumers are venturing out of their homes for the first time in months. A global shortage in auto parts and components also exacerbated the price pressures.

For the 12-month period, used car and truck prices leaped 45.2%, while car and truck rental costs skyrocketed 87.7%, the Labor Department reported.

“Consumers have cash in their pockets and rental car companies are looking to rebuild fleets at a time when auto output is being constrained by component shortages,” ING Economics chief international economist James Knightley said in a note.

Bank of America economists believe this may be the peak of used car-price strength as the increase in sticker prices for consumers has now exceeded the jump in wholesale used car prices, which started to moderate in June.

Additionally, multiple types of fuel including gasoline, fuel oil and other motor fuels were among the categories that saw the biggest price increases. Gasoline futures have climbed more than 60% this year as Americans have gone on a post-pandemic driving spree.

Pricing rebound in airfares, food and lodging

Meanwhile, categories tied to the broad economic comeback from the pandemic also contributed to the surge in inflation.

Public transportation, which includes airline fares, recorded a 17.3% jump year over year, while lodging away from home including hotels and motels saw a 16.9% year-over-year burst.

During Memorial Day weekend, air traveler volumes hit the highest levels since before the coronavirus pandemic began. And air travel demand is expected to rebound amid the peak vacation season in the summer.

Excluding price increases in used cars, new cars, lodging and transportation services, the core CPI would have risen only by 0.18% month over month, which in normal times would be a relatively healthy increase in prices, according to Bank of America.

Certain grocery and food item also experienced a price increase as of late. Notably, fresh fruits, limited service meals and snacks and food from vending machines all recorded at least a 5% increase year over year.

PepsiCo and Conagra Brands said Tuesday they plan to pass along higher input costs to customers as inflation accelerates. The two cited rising costs for some ingredients, freight and labor.

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