From February to March, consumer goods and service prices jumped to an inflation rate 8.5% y/y. The monthly uptick was +1.2%, according to the government’s Consumer Price Index (CPI).
Largest Annual Increase in Consumer Prices Since 1981.
Prices for consumer goods and services jumped +8.5% y/y and +1.2% m/m from February to March alone, according to the Consumer Price Index (CPI).
Rising gas prices in March were chiefly responsible for this largest monthly increase in consumer prices in recent memory, according to the CPI breakdown. Prior to March, the rising cost of housing, specifically rental housing rather than home prices, was the primary inflationary culprit.
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Rent Increases Slowed in March
Rather than continuing to spike, rent increases slowed in March. “Owner’s equivalent rent,” nomenclature for homeownership costs, increased +0.4% from February to March, pretty much in line with the January to February increase of +0.4%.
Renters saw their housing costs increase +0.4% m/m in March, lower than the two previous months.
Specifics of Cost Increases in March
When eliminating the “core” categories of energy and food, consumer prices rose +6.5% y/y and +0.3% m/m, the lowest monthly core inflation rate in six months.
(Investors, by the way, appeared relieved with this slowed down core inflation rate. The S&P 500 stock index rose +.5% when the CPI’s report was released.)
Gas prices spiked +48% y/y and +18% m/m. All by themselves, gas prices drove more than 50% of monthly consumer price increases. According to Gregory Daco, chief economist the strategy consultancy EY-Parthenon with Ernst & Young, “These (gas price) numbers are likely to represent something of a peak.”
Food costs increased +10% y/y and +1.5% m/m; electricity increased +2.2% m/m; household furnishings and supplies increased +1% m/m.
The price of used cars and trucks dropped -3.8% m/m. Despite this being largest month-to-month drop in used vehicle prices since 1969, the price of used vehicles remained +35% above their prices one year ago.
CPI Measures Housing Costs by “Shelter” Costs – aka Rents or Rent Equivalents
The CPI measures shelter costs or rents/rent equivalents, not home value assets, to estimate the “cost of the service homes provide.”
According to the CPI, the cost of a renter’s primary residence increased +4.4% y/y, the fastest annual increase since 2007. The amount a homeowner could rent their primary residence increased +4.5% y/y, the fastest annual rate since 2002.
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Thanks to Inman, The New York Times and National Public Radio.
