U.S. Headline Consumer Price Inflation Slowed Further in March

The Consumer Price Index edged up a less-than expected 0.1% m/m (5.0% y/y) in March following a 0.4% monthly gain in February. The 5.0% y/y rate was the lowest since May 2021 and well below the recent peak of 9.1% in June 2022. The Actions Economic Forecast Survey had expected a 0.3% monthly increase.

The index for shelter (+0.6% m/m) was by far the largest contributor to the monthly all items increase. Compared to a year ago, the shelter index is up 8.2%, its highest rate since June 1982. The March rise in the price of shelter more than offset a decline in the energy index, which decreased 3.5% m/m (-6.4% y/y) in March as all major energy component indexes declined. The food index was unchanged in March (+8.5% y/y).

The reading on the core index in March, however, was a little more worrisome. It rose 0.4% m/m, in line with expectations, with the y/y ticking up to 5.6% from 5.5% in February. The 8.2% y/y increase in the shelter index accounted for over 60% of the total increase in all items less food and energy. Component prices that increased in March included shelter (which contained a 2.7% m/m jump in prices of lodging away from home), motor vehicle insurance (1.2% m/m), airline fares (4.0% m/m), household furnishings and operations (0.4% m/m), and new vehicles (0.4% m/m). Prices of medical care (-0.5% m/m, the fifth monthly decline in the past six months) and the index for used cars and trucks (-0.9% m/m) were among those prices that decreased over the month.

Energy prices continued their general decline since last July. The 3.5% monthly decline reflected declines in each major category. Gasoline prices fell 4.6% m/m after having risen in both January and February while fuel oil prices declined 4.0%, their fourth consecutive monthly drop. Electricity prices fell 0.7% m/m, their first decline since February 2022. And natural gas prices plummeted 7.1% m/m following an 8.0% monthly plunge in February.

Food prices were unchanged in March, the first non-positive reading since November 2020. Prices of food consumed at home fell 0.3% m/m in March, their first monthly decline since September 2020. A 1.3% m/m decline in prices of fruits and vegetables and a 1.4% m/m decrease in prices of meats, poultry, fish, eggs led the overall decline. By contrast, prices of food consumed away from home rose 0.6% m/m, the same monthly increase as in January and February. The 8.8% y/y rate of advance was the fastest since August 1981.

The Consumer Price figures can be found in Haver's USECON database. The expectations figure is contained in the AS1REPNA database.