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Consumer prices surged in April by the most in any 12-month period since 2008 as the recovery picked up, reflecting both rising demand as the Covid-19 pandemic eases and supply bottlenecks.

The Labor Department reported its consumer-price index jumped 4.2% in April from a year earlier, up from 2.6% for the year ended in March. Consumer prices increased a seasonally adjusted 0.8% in April from March. The index measures what consumers pay for goods and services, including clothes, groceries, restaurant meals, recreational activities and vehicles.

Higher prices for used autos surged 10% in April compared with the prior month—the largest monthly increase on record. That accounted for more than a third of the increase, the Labor Department said.

U.S. stocks fell after the inflation data was released, extending pressure on financial markets. Investors are concerned that rising prices could prompt the Federal Reserve to move on interest rates sooner than expected.

Policy makers are watching April’s reading to gauge the extent of what many expect to be a monthslong rise in prices, after a year of anemic overall inflation as the pandemic curbed consumer spending. Whether an upswing in prices proves temporary is a key question for financial markets and the U.S. recovery, as the Biden administration, Congress and the Fed continue to support the economy with fiscal- and monetary-policy measures.

The so-called core price index, which excludes the often-volatile categories of food and energy, climbed 3% in April from a year before.

Food prices climbed 2.4% from the same month a year ago, including a 3.8% rise in the cost for restaurant meals and other meals away from home. Car and truck rentals surged 82% compared with April 2020, and airline fares leapt 9.6%.

The annual inflation measurements are currently being affected by comparisons with the figures from last year early in the pandemic, when prices dropped steeply due to collapsing demand for many goods and services during Covid-19 lockdowns, said Laura Rosner-Warburton, senior economist at MacroPolicy Perspectives. This so-called base effect is expected to influence inflation readings until the summer, she said. For example, gasoline prices soared 50% versus April 2020, though they decreased 1.4% versus March.

Compared with two years ago, overall prices rose a more muted 2.2% in April.

The Fed has said that it expects the inflation pickup to be transitory and that it would hold rates near zero until the central bank’s preferred inflation measure is averaging 2% and full employment has been achieved. A persistent, significant increase in inflation could prompt the central bank to tighten its easy-money policies earlier than it had planned, or to react more aggressively later, to achieve its 2% inflation goal.

At The Wall Street Journal’s CEO Council Summit, Janet Yellen expressed her confidence that the U.S. economy and employment will return to normal by next year.

Today’s higher-than-expected reading will certainly stoke inflation fears, said Tim Duy, chief U.S. economist at SGH Macro Advisers.

“Whether or not that translates to more sustained inflation over time is still an open question,” said Mr. Duy, adding that those concerns are unlikely to sway central bankers. “The Fed has itself locked into their new policy framework and for right now they’re treating this as a transitory event.”

White House officials speaking ahead of the report’s release said the administration is closely tracking a range of potential economic risks, including inflation. The administration anticipates temporary inflation to continue for several months, perhaps through much of 2021, a result of what one White House official described as mismatches between supply and demand as the economy comes back online after widespread pandemic-related lockdowns.

Some Republicans have taken aim at Democrats and the administration, saying their policies are a factor that will drive up inflation. “The @USDOL’s consumer price index for April showed the largest spike in inflation since 2008. President Biden is bungling our economic recovery,” tweeted Sen. Roger Marshall (R., Kan.).

Consumers are seeing many prices jump for a variety of reasons as the U.S. economic recovery gains momentum. Used-car prices have surged, thanks to a global chip shortage that has damped production of new cars. The average price paid for a used car exceeded $25,000 in April for the first time in the history of research firm J.D. Power’s tracking. Many companies are passing on to consumers the higher costs they are facing for crops, oil and truckers’ wages. Airfares and hotel-room rates are climbing as consumers start traveling again after a year of restraint during the pandemic.

More broadly, rising prices reflect strong consumer demand fueled by widespread Covid-19 vaccinations, easing business restrictions, trillions of dollars in federal pandemic relief programs and ample consumer savings. Real U.S. gross domestic product rose 6.4% at a seasonally adjusted annual rate in the first quarter and economists surveyed by The Wall Street Journal in March forecast the second quarter to grow at an 8.1% annual rate, putting the U.S. economy on track for its best year since the early 1980s.

“I think a lot of us are expecting a pretty significant increase of spending on services in the next couple months and that’s where a lot of the pressure on CPI is going to come from,” said Richard F. Moody, chief economist at Regions Financial Corp., referring to the consumer-price index.

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The longer that burst of spending persists, the more latitude producers have to raise prices, he said. And once prices go up, they seldom fall back to where they were, even if the acceleration in overall inflation is temporary, he added. “That very much matters in terms of what’s the lasting impact on household budgets,” said Mr. Moody.

John Wertz, a 34-year-old Seattle resident, said he has noticed a sharp climb in prices for steak, beer, ride-sharing services, takeout and other goods and services—and has cut back accordingly. Mr. Wertz said he is conflicted in particular about having to pull back on visits to the breweries he used to frequent and still wants to support.

“I’d say prices for grabbing a beer to consume on site have gone up around 15% to 20%. This is a combination of either raising the sticker price or no longer including sales tax in the sticker price,” said Mr. Wertz, who is earning his Ph.D. in accounting. “Either of these makes it harder to justify going out as often because the amounts add up.”

Some 36% of small businesses indicated that they had raised selling prices in April, the highest share since 1981, according to a survey conducted by the National Federation of Independent Business.

Stronger demand has spurred employers to try to hire more workers, but many businesses are saying they can’t find enough people to hire. Job openings reached a high in March as the gap widened between open positions and workers taking the roles, a dynamic that could push up wages.

The employment cost index for the first quarter of 2021 showed that wage growth returned to the same pace as in 2018 and 2019, in what was a tight labor market at the end of the last expansion.

If inflation remains elevated, it will get harder and harder for the Fed to stick to its stance, said Mr. Moody. “And that’s where market participants could start to diverge from the FOMC, in which case we would see rates move higher,” he added, referring to the Fed’s policy-setting committee.

Write to Gwynn Guilford at gwynn.guilford@wsj.com

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