CPI: March Sadness

Summary The headline consumer price index surged 1.2% in March, the largest monthly increase since September 2005. About 70% of March’s increase can be tied to higher energy prices following Russia’s invasion of Ukraine, but energy was not the only source of pain for households. Food at home prices jumped 1.5% in March and 10% over the past year, the latter being the largest one-year increase in grocery prices in 41 years. The squeeze on households’ from skyrocketing prices for necessities is very real. However, underneath the surface there are signs that pandemic-related inflation is beginning to ease. Core goods inflation fell by the most since April 2020, led by a decline in used auto prices, while core services inflation gathered steam amid higher prices for airfare, lodging away from home and other “reopening” categories. This rotation away from goods and toward services inflation has been long anticipated, and although widening lockdowns in China are a risk to this transition, today’s data are an encouraging sign that goods inflation is finally rolling over. Despite another month of wide-ranging price increases in March, we believe this likely marks the peak in post-COVID inflation. Upcoming monthly gains will be set against the eye-popping inflation of last spring’s reopening, when prices rose 0.6%-0.9% per month from April to June. READ FULL ARTICLE>>