Inflation cooled in March and the annual rate of inflation decreased for a ninth consecutive time, reaching the lowest level in twenty-two months, according to a U.S. government report released Wednesday, April 12. Nevertheless, U.S. consumer prices remained high year-over-year, and the underlying or core inflation rate actually increased over the same period.
Although inflation remains stubbornly high for many goods and services, Americans saw some relief in March as gasoline prices dropped and grocery prices remained stable. However, housing prices continue to climb, with shelter prices marking their largest 12-month increase since June 1982.
In the headline monthly figure, U.S. consumer prices rose 0.1% in March, following a 0.4% increase in February, the Labor Department said in its monthly report on the Consumer Price Index (CPI). The CPI is a closely watched inflation gauge that measures what Americans consumers pay for everyday items, ranging from coffee to cars.
Overall food prices were flat in March compared to a 0.4% increase in February. Within the category, the rate of increase in grocery prices decreased by 0.3%, marking their first monthly decline since September 2020. In contrast, the cost of eating out continued to rise, increasing by 0.6% for the third consecutive month. Despite this, food inflation during the past year remained elevated at 8.5%, down from 9.5%. During the same period, grocery prices decreased from 10.2% to 8.4%, while the cost of food consumed outside of the home increased from 8.4% to 8.8%.
In other news, prices at the pump fell 4.6% in March, following a 1% increase in February. On a year-on-year basis, gas prices dropped by 17.4%, compared to a 2% fall previously. Looking back for some perspective, the highest level of gasoline inflation in the past year occurred in the 12 months ending June, when it reached 59.9%, the highest level since March 1980.
The broader index for energy, which combines items like gasoline, electricity, and fuel oil, fell 3.5% for the month after declining by 0.6% in February. Energy prices year-over-year decreased 6.4%, after rising 5.2% previously.
Excluding the more volatile food and energy components, the rate of core consumer prices slowed to 0.4% in March from 0.5% in the previous month.
Shelter or housing prices rose 0.6% in March, down from 0.8% in the prior month, but showed a significant year-over-year increase of 8.2%, marking their largest 12-month jump since June 1982.
"The shelter index increased 8.2 percent over the last year, accounting for over 60 percent of the total increase in all items less food and energy," the Labor Department’s monthly report said.
Components of shelter include prices of items like rent for apartments, rental equivalence, lodging away from home such as hotels and motels, and housing at schools. This index accounts for about one-third of the entire CPI.
In other closely watched pricing categories:
- Clothing prices for the month rose 0.3% following two straight 0.8% gains. They increased 3.3% from a year ago.
- New vehicle prices increased 0.4% following two consecutive 0.2% increases, for 23 straight advances, while they climbed 6.1% year-over-year.
- Prices for used cars and trucks, however, dropped for a ninth month in a row, falling 0.9% most recently, while their year-on-year level fell 11.2%. As a stark contrast, a year ago February they logged a soaring year-on-year pace of 41.2%.
- Compared to a year earlier, airline fares increased 17.7% from 26.5%. They increased 4% in February, after rising by 6.4% in February.
Regarding the headline annual figure, inflation increased by 5% from a year earlier, down from 6% previously, marking the first time in 18 months that it has been below 6%. This represents the smallest annual inflation rate since May 2021. For some perspective, the highest rate of inflation in the past year occurred in the 12-month period ending in July, at 9.1%, which was the fastest rate of inflation since November 1981.
Meanwhile, core inflation picked up to 5.6% over the past year, up from 5.5% 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 guides the central bank when setting its key interest rate. As recently as September, the core rate at 6.6% was the highest since August 1982. Many economists consider the core reading as a better predictor for future inflation.
"As the economy slows, consumer prices will decelerate further and should bring inflation closer to the Fed’s long-run target of 2%," CNBC quoted Jeffrey Roach, chief U.S. economist at LPL Financial. "Markets will likely react favorably to this report as investors gain more confidence that the next Fed meeting may be the last meeting when the Committee raises the fed funds target rate."
“The bottom line is that inflation still remains too hot for the Fed’s liking,” Reuters quoted Sarah House, a senior economist at Wells Fargo in Charlotte, North Carolina. “That said, there are forward-looking signs that suggest inflation will slow further in the coming months.”
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 12, 2023. 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 2022 to March 2023 Consumer Prices – Gains & Losses in Percent
(Seasonally Adjusted from Prior Month and Unadjusted 12-Month)
|Aug 2022||Sept 2022||Oct 2022||Nov 2022||Dec 2022||Jan 2023||Feb 2023||Mar 2023||12 Month|
|Food at home||0.8||0.7||0.5||0.6||0.5||0.4||0.3||-0.3||8.4|
|Food away from home||0.9||0.9||0.9||0.5||0.4||0.6||0.6||0.6||8.8|
|Gasoline (all types)||-8.4||-4.2||3.4||-2.3||-7||2.4||1||-4.6||-17.4|
|Utility (piped) gas service||3.5||2.2||-3.7||-3.4||3.5||6.7||-8||-7.1||5.5|
|All items less food, energy||0.6||0.6||0.3||0.3||0.4||0.4||0.5||0.4||5.6|
|Commodities less food, energy||0.4||0||-0.1||-0.2||-0.1||0.1||0||0.2||1.5|
|Used cars and trucks||-0.2||-1.1||-1.7||-2||-2||-1.9||-2.8||-0.9||-11.2|
|Services less energy||0.6||0.8||0.5||0.5||0.6||0.5||0.6||0.4||7.1|
The BLS releases inflation data around the middle of the month for consumer prices surveyed up to the previous month. The Consumer Price Index (CPI) for April and the latest annual period will be made public on May 10, 2023.
The CPI data is also used to calculate inflation rates and to power this site’s U.S. Inflation Calculator. The U.S. Inflation Calculator displays the cumulative inflation and the change in the buying power of the U.S. dollar over time.