US Inflation Hits 2.7% as March 2011 Consumer Prices Rise 0.5%

The cost of living climbed in March 2011 for a ninth straight month as Americans were hit with sharply higher food and energy prices that pushed the annual rate of US inflation up from 2.1% to 2.7%. However, consumer prices were relatively tame aside from food and energy, according to data published by the US Labor Department on Friday.

The Consumer Price Index (CPI), the government’s main mechanism for tracking US inflation, rose in line with most economists’ forecasts. Consumer prices climbed 0.5 percent in March 2011, matching the previous monthly increase which had registered as the largest since June 2009. Food and energy prices during the month rose 0.8 and 3.5 percent, respectively, as compared to increases of 0.6 and 3.4 percent in the prior month.

"Gasoline and food prices continued to rise and together accounted for almost three quarters of the seasonally adjusted all items increase in March. The gasoline index posted its ninth consecutive increase and has now risen 14.4 percent over the last three months," the US Labor Department said. "The household energy index rose as well, with advances in the fuel oil and electricity indexes more than offsetting a decline in the index for natural gas. The food at home index continued to accelerate in March, rising 1.1 percent as all six major grocery store food groups increased."

Over the past 12 months, food prices advanced 2.9 percent while energy costs soared 15.5 percent. The energy index was led by gasoline which jumped 27.5 percent. Prices at the pump were up 5.6 percent in March alone.

Other price increases last month included new and used vehicles, transportation, medical care, and airline fares. For a second straight month, clothing was one of the few areas where American consumers caught a break. Prices dropped 0.5 percent, although that was weaker than February’s negative reading of 0.9 percent which registered as the biggest decline for apparel since July 2006.

Stripping out food and energy costs, the so-called core US inflation rate advanced 0.1 percent in March 2011. That was below expectations as most forecasts pegged the increase at 0.2 percent, matching February and January.

"There are fairly subdued pressures outside of food and energy," Bloomberg quoted Sal Guatieri, a senior economist at BMO Capital Markets Inc. in Toronto, who correctly forecast the core rate. "There is still little appetite on the part of consumers to absorb cost increases and retailers are finding it difficult to pass rising input costs onto consumers, largely because consumer wages are rising very modestly."

As mentioned, US inflation rose 2.7 percent over the past year — the biggest year-over-year gain since December 2009, and up from the 2.1 percent 12-month level in February and the 1.6 percent in the year to January. The core US inflation rate, which is closely monitored by the Federal Reserve, rose 1.2 percent over the past 12 months. That compares to the previous 1.1 percent. The core CPI remains below the Federal Reserves preferred range of between 1.6 and 2.0 percent.

"The Fed is not going to see inflation as a threat so they have the freedom to keep interest rates low longer," said David Wyss, chief economist at Standard & Poors Ratings Services in New York, according to Reuters. "But core inflation is creeping up from its lows six months ago, so the Fed is going to end its extraordinary measures.

September 2010 through March 2011 and 12-month consumer prices as reported by the US Labor Department follow:

March 2011 Consumer Prices – Gains (%)

Sept Oct Nov Dec Jan Feb Mar 12
Month
All items 0.1 0.2 0.1 0.5 0.4 0.5 0.5 2.7
  Food 0.3 0.1 0.2 0.1 0.5 0.6 0.8 2.9
    Food at home 0.3 .0 0.3 0.1 0.7 0.8 1.1 3.6
    Food away from home 0.3 0.1 0.1 0.1 0.2 0.2 0.3 1.9
  Energy 0.7 2.6 0.2 4.6 2.1 3.4 3.5 15.5
    Energy commodities 1.8 4.4 0.8 7.5 4.0 4.8 5.5 27.5
      Gasoline (all types) 1.6 4.6 0.7 8.5 3.5 4.7 5.6 27.5
      Fuel oil 0.8 4.7 4.2 4.9 6.8 5.8 6.2 34.0
    Energy services -0.8 0.2 -0.7 0.5 -0.6 1.1 0.2 -0.6
      Electricity -0.3 0.4 0.9 0.3 -0.5 0.4 0.7 1.0
      Utility (piped) gas service -2.3 -0.4 -5.7 1.4 -1.2 3.4 -1.4 -5.5
  All items less food, energy .0 .0 0.1 0.1 0.2 0.2 0.1 1.2
    Comm. less food, energy -0.2 -0.2 -0.1 .0 0.2 0.2 0.1 0.2
      New vehicles 0.1 -0.2 -0.4 .0 -0.1 1.0 0.7 1.6
      Used cars and trucks -0.7 -0.9 -0.5 -0.1 -0.3 0.1 0.8 2.3
      Apparel -0.6 -0.3 0.2 0.1 1.0 -0.9 -0.5 -0.6
      Medical care 0.3 0.1 0.2 0.1 0.5 0.7 0.5 2.8
    Services less energy 0.1 0.1 0.2 0.1 0.1 0.2 0.2 1.6
      Shelter .0 0.1 0.1 0.1 0.1 0.1 0.1 0.9
      Transportation 0.3 0.3 0.5 0.2 0.6 0.5 0.5 3.7
      Medical care 0.8 0.2 0.1 0.3 -0.1 0.4 0.1 2.7

 

The Labor Department’s Consumer Price Index (CPI) for April 2011 is scheduled for release on May 13, 2011, at 8:30 a.m. (ET). The CPI data is used as the core engine for the US Inflation Calculator.

5 thoughts on “US Inflation Hits 2.7% as March 2011 Consumer Prices Rise 0.5%”

  1. “Stripping out food and energy costs” – well, Im an average worker who makes average wages, and most of my budget is food/energy. Since that takes most of my paycheck (oh yes, taxes) – there is nothing left at end of the week. So, again – I am the little guy and im getting clobbered!!!!

  2. The fact that we can print as many dollars we want to pay our debts in China and the middle east is definitely not helping slow down inflation. I have a feeling many standards of living in the US will be changed forever within the next 10-20 years. People need to start doing something to protect themselves from this sooner rather than later!

    Thanks for this great info!

  3. I thought 2-3% was the target inflation range for policy-setters. Suddenly below 3% is considered horrifying?

  4. The inflation figures published by the government are deceiving. Try putting in a nickel candy bar in 1970, and see what it comes out to in 2011. Not even close. Candy costs way more than just inflation. Also, remember that the size of the bar has shrunk multiple times over the years. What they call a king-size bar is not really much bigger, if at all, from the 1960’s standard. Want to get a different picture? Just try your search engine with the term ‘real inflation rate’. It’s an eye opener.

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