U.S. Inflation Hits 2 1/2-Year High; Consumer Prices in March Log Biggest Gain in 8 1/2 Years

U.S. inflation over the past year registered at a more than two-and-a-half-year high and consumer prices in March posted their biggest increase in more than eight and a half years, according to a government report released Tuesday, April 13.

Energy prices compared to a year ago increased for a second time following 11 consecutive declines. The over 13% surge is obviously significant. Then again, year-over-year pricing changes for many items, like energy, is somewhat skewed as consumer spending was impacted significantly in March 2020 due to the pandemic and resulting shutdowns.

U.S. consumer prices advanced 0.6% in March, the biggest increase since August 2012, after rising 0.4% in February, the Labor Department said in its monthly report on the Consumer Price Index (CPI). The CPI is a broad measure of what Americans pay for everyday items ranging from coffee to cars.

In major consumer pricing categories:

  • Prices at the pump jumped 9.1% from 6.4% previously. The Labor Department noted that nearly half of the month’s entire CPI gain resulted from the increase. Gasoline prices increased 22.5% year-over-year.

  • The broader index for energy, which combines items like gasoline, electricity and fuel oil, advanced 5% from 3.9%. Energy prices increased 13.2% in the past 12 months.

  • Prices for food edged up 0.1% after rising 0.2%. Food prices increased 3.5% year-over-year.

Excluding the more volatile food and energy components, core consumer prices increased 0.3% in March, up from 0.1% in February.

"The shelter index increased in March as did the motor vehicle insurance index, the recreation index, and the household furnishings and operations index. Indexes which decreased over the month include apparel and education," the Labor Department’s monthly report said.

Shelter or housing costs for the month rose 0.3% from 0.2%. They increased 1.7% from a year ago. Components of shelter include pricing items like rent for apartments, rental equivalence, lodging away from home such as hotels and motels, and housing at schools. The index accounts for about one-third of the entire CPI.

The cost of health care for the month slowed to 0.1% from 0.3%. Health care prices rose 1.8% year-over-year.

In the headline figure, inflation in the United States surged 2.6% in the 12 months ended March, the biggest increase since the annual period ending August 2018 and compared to 1.7% previously.

Core inflation increased 1.6% over the past 12 months against 1.3% previously. The core, "all items less food and energy" index is one of the benchmark inflation rates monitored by the Federal Open Market Committee (FOMC) as it helps the central bank decide where to set its key interest rate.

"Officials will call the increase in inflation ‘transitory’ and will push back hard against the idea that any sort of policy response is needed," MarketWatch quoted chief economist Ian Shepherdson of Pantheon Macroeconomics. "That idea will hold for a while, but if the increase in inflation persists, and — especially — if it is accompanied by faster wage growth, then the Fed’s line will become untenable."

The following table of key inflation figures is for the last seven months through March, as published by the U.S. Labor Department’s Bureau of Labor Statistics (www.bls.gov/cpi) on April 13, 2021. To index the data each month, the BLS monitors the prices of about 80,000 consumer goods and services from around the nation. All monthly and annual pricing changes are in percentages.

September 2020 to March 2021 Consumer Prices – Gains & Losses in Percent

  September 2020 October 2020 November 2020 December 2020 January 2021 February 2021 March 2021 12 Month
All items 0.2 0.1 0.2 0.2 0.3 0.4 0.6 2.6
  Food 0.1 0.2 .0 0.3 0.1 0.2 0.1 3.5
    Food at home -0.3 0.1 -0.2 0.3 -0.1 0.3 0.1 3.3
    Food away from home 0.6 0.3 0.1 0.4 0.3 0.1 0.1 3.7
  Energy 1.4 0.6 0.7 2.6 3.5 3.9 5.0 13.2
    Energy commodities 1.4 0.7 0.5 5.1 7.3 6.6 8.9 22.0
      Gasoline (all types) 1.7 0.7 0.5 5.2 7.4 6.4 9.1 22.5
      Fuel oil -3.0 0.7 3.3 10.2 5.4 9.9 3.2 20.2
    Energy services 1.3 0.5 0.9 0.2 -0.3 0.9 0.6 4.1
      Electricity 0.8 0.6 0.3 0.4 -0.2 0.7 .0 2.5
      Utility (piped) gas service 3.1 0.4 3.0 -0.4 -0.4 1.6 2.5 9.8
  All items less food, energy 0.2 0.1 0.2 .0 .0 0.1 0.3 1.6
    Commodities less food, energy 0.5 .0 .0 0.1 0.1 -0.2 0.1 1.7
      New vehicles 0.3 0.3 .0 0.4 -0.5 .0 .0 1.5
      Used cars and trucks 5.3 0.9 -1.4 -0.9 -0.9 -0.9 0.5 9.4
      Apparel -0.4 -0.9 0.7 0.9 2.2 -0.7 -0.3 -2.5
      Medical care -0.6 -0.7 -0.4 -0.2 -0.1 -0.7 0.1 -2.4
    Services less energy 0.1 0.1 0.2 .0 .0 0.2 0.4 1.6
      Shelter 0.1 0.1 0.1 0.1 0.1 0.2 0.3 1.7
      Transportation -0.3 0.2 1.3 -0.6 -0.3 -0.1 1.8 -1.6
      Medical care .0 -0.3 -0.1 -0.1 0.5 0.5 0.1 2.7

 

The BLS tends to release inflation data around the middle of a month based on consumer prices surveyed in the previous month. The Consumer Price Index (CPI) for April and the latest annual period become public on May 12, 2021.

CPI data is used in calculating inflation rates and in this site’s U.S. Inflation Calculator. The US Inflation Calculator shows cumulative inflation and the change in buying power of the U.S. dollar over time.

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