Inflation Rises as Iran Conflict Drives Energy Costs
By Tom LoBianco | Quincy News Correspondent
Click here for updates on this story
Washington (Quincy News) — New inflation and spending figures are offering the clearest picture yet of how the war in Iran is driving up energy costs and squeezing American consumers.
Year-over-year inflation rose 3.8% last month, driven by a 17.9% increase in the cost of energy, according to the April Consumer Price Index (CPI) report released Tuesday.
Meanwhile, Treasury Department figures released Tuesday showed higher military spending tied to the war, $43 billion less in tax collections following last year’s “One Big Beautiful Bill,” and rising interest payments on U.S. debt.
The April CPI data, which typically lags world events by several weeks, showed American spending keeping pace with price increases, though analysts warned that may not last.
“The big Achilles’ heel in the economy right now is what we’re all seeing when we drive by and go to the gas station,” said Heather Long, chief economist for Navy Federal Credit Union, on C-SPAN. “The cost of living and inflation is now eating up all the wage gains for a typical worker.”
Analysts with KPMG noted that steady spending is starting to wear thin with growing defaults on items like car loans and decreased spending on higher-end purchases to offset increased spending on basics.
“That suggests the consumer spending contribution to second quarter GDP will be modestly positive,” said KPMG senior economist Yelena Maleyev.
The latest data comes as President Donald Trump celebrated a key victory amid ongoing tensions with the Federal Reserve after the Senate confirmed his pick for the next chair, Kevin Warsh. Former Chair Jerome Powell, who has faced criticism from Trump and scrutiny related to the Fed’s headquarters renovation project, said he plans to remain on the Board of Governors after stepping down as chair.
Food and energy prices are typically excluded from core inflation measures within the CPI. While some of April’s increase reflected corrections tied to missing data during last fall’s government shutdown, inflation pressures also broadened into core categories as the war dragged on.
Separately, the Bureau of Labor Statistics (BLS) which publishes the CPI, announced it would begin incorporating secondhand clothing purchases into the index as U.S. consumers become more price-conscious and environmentally aware.
“The shift toward secondhand apparel is driven by consumer concerns about clothing costs and environmental sustainability, particularly within younger generations,” BLS wrote in the announcement.
Treasury officials said during a briefing on the April Monthly Treasury Statement that some effects of changes made under the sweeping “One Big Beautiful Bill” signed last year began appearing in April, with additional impacts expected this fall as key provisions continue taking effect.
Individual refunds jumped 17% in April to $101 billion and corporate tax refunds jumped 87%, according to a Treasury Department official.
The year-to-date deficit stood at $954 billion, but interest payments on the U.S. debt hit a monthly record in April of $112 billion, the Treasury official said on a call with reporters Tuesday.
Please note: This story was provided to CNN Wire by an affiliate and does not contain original CNN reporting. This content carries a strict local market embargo. If you share the same market as the contributor of this article, you may not use it on any platform.