Economy Reawakening & Inflation Rate Rises

Key Highlights

• Consumer prices rose faster than expected in March
• Inflation fears likely to overstate extent of acceleration

Consumer Prices Increased Faster than Expected in March

The Consumer Price Index (CPI) increased +0.6% m/m from February to March, according to the US Labor Department.  Core inflation, which does not include food and energy prices, rose from 0.1% in February to 0.3% in March.

Gasoline prices drove the increase with a rise of +9.1% in March.

Economists had anticipated a month-to-month increase of 0.5% rather than the increase of 0.6% and a year-to-year increase of 2.5% from March 2020 rather than the increase of 2.6%.

Inflation Beginning to Creep U

With the year-to-year March inflation increase to +2.6%, we are seeing a jump.  However, remember that prices dropped significantly in March 2020 due to the pandemic so put it all into perspective

Annual Inflation Rate May “Overstate” the Reality

It’s likely that the April inflation rate may be higher than this bump in March.  Why? Because of late year’s significant drop.

Experts have been signaling a rise in inflation and in prices alike for a while now as a result of reopening businesses and consumer pent-up demand. BUT, these experts including Federal Reserve officials do not expect those increases to persist for longer than a few months.

So, the short answer to the question, “Is inflation Coming?” is, “Maybe,” according to Bloomberg . Whether or not price increases continue once pandemic effects to the economy end is anyone’s guess.  The other question concerns the accuracy the CPI in today’s rapidly changing consumer spending habits.

Thanks to The New York Times and Bloomberg.

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