Consumer prices accelerated in March to 3.5%

April 10, 2024
49 Views
2 Comments


Inflation remained elevated once again in March, adding another round of price increases to Americans’ already-strained wallets.

The Bureau of Labor Statistics reported that 12-month price growth accelerated from 3.2% in February to 3.5% in March, matching consensus forecasts among economists.

Excluding food and energy, which represent commodities with more volatile prices, the so-called core 12-month reading was unchanged in March at 3.8%.

Customer looks at deli meat section at grocery store.
If there was any relief, it was in grocery prices, which were up just 1.2% on the year.Justin Sullivan / Getty Images

Some of the items seeing the largest 12-month leaps in price gains included auto insurance, which soared 22.2%; domestic services like home cleaning, up 10.9%; baby food and formula, up 9.9%; and outpatient hospital services, up 8.3%.

If there was any relief, it was in grocery prices, which were up just 1.2% on the year. And prices for new and used vehicles fell.

But Greg McBride, chief financial analyst at Bankrate, put the situation succinctly in an email following Wednesday’s release.

“There is no improvement here, we’re moving in the wrong direction,” he said.

On paper, the U.S. economy has looked solid. The unemployment rate has now remained below 4% for the longest stretch since the 1960s. Stocks have been at all-time highs. The economy continues to add jobs.

But since the start of the pandemic, Americans have seen average prices increase more than 20% overall — giving people a sense that the cost of many goods and services, not to mention housing, has surged to unreasonable levels.

When will prices come down?

So what will cause price growth to finally slow down to the Federal Reserve’s 2% target?

Unfortunately, it usually takes a major economic crisis for broad categories of prices to reverse. Instead, the best that consumers can hope for is that they stop going up so fast.

While there are some signs that it’s happening — grocery price increases, for instance, have finally fallen below 2% after surging during the pandemic — economists say it’s likely to still take some time for inflation to truly subside.

Complex economic forces, they say, continue to keep price growth elevated.

A significant worker shortage sparked by the pandemic — especially for front-line service employees — helped push hourly pay higher. But this resulted in pushing up prices on the consumer side, since labor costs represent a significant portion of the overall cost of given goods or service.

Meanwhile, supply chain disruptions that emerged during the pandemic have yet to fully subside, said Sarah House, a managing director and senior economist at Wells Fargo.

She pointed to automobile prices, which have surged more than 20% since the start of the pandemic for new vehicles and more than 30% for used vehicles. While the pace of their price increases has abated, difficulties in sourcing auto parts, plus the loss of experienced technicians, have pushed vehicle prices higher.

This, in turn, has pushed auto insurance rates higher — and it turns out that car insurance commands a significant percentage of the overall increase in consumer prices.

“The services side is where we’re continuing to see stronger [price] growth,” House said. “That’s where we’re still getting an elevated degree of inflation from.”

Stagnant pay and higher borrowing costs

Americans’ pay has barely kept up with the price increases. While federal stimulus at the outset of the pandemic helped give people a cash cushion during the worst of it, there is an emerging consensus that this same cushion helped drive prices higher by giving people money to spend.

On net, Bureau of Labor Statistics data shows that the effect of inflation has caused Americans’ average hourly pay to rise by just a few cents compared with where it was at the start of the pandemic.

The Federal Reserve, which is in charge of taming price growth, in part by raising interest rates, has sought to fight fire with fire. By raising the cost of borrowing money, the central bank has tried to reduce demand for goods and services, ultimately pushing price growth down.

The Fed’s interest rate hikes have indeed caused borrowing costs for everything from credit cards to automobiles to homes to climb to levels not seen in years.

For many Americans, that’s meant getting locked out of the housing market, not to mention paying credit card rates above 20% and auto loan rates above 8%.

But inflation has persisted, surprising many economists. At the start of the year, the consensus forecast was for economic growth to slow, allowing the Fed to start cutting interest rates this spring, with a total of three cuts for 2024.

But a growing number of analysts now say that, at a minimum, rate cuts will be delayed. Still others say there won’t even be three cuts.

Despite all the challenges, the risk of a recession that would lead to significant job losses remains low. Yet there are signs that consumer jitters are accelerating. The New York Federal Reserve reported Monday that fears of job losses are climbing and that workers who are already out of a job say getting hired is now more difficult than it was prior to the pandemic.

While about one-quarter of Americans report their household financial situation to be better than a year ago, about one-third report being worse off.

It all adds up to a precarious situation. In a speech last week, Federal Reserve Chair Jerome Powell called the economic outlook “still quite uncertain.”

“The job of sustainably restoring 2% inflation is not yet done,” he said.



Spread the love

You may be interested

Hundreds walk out of Harvard College graduation; UCLA contends with new protest
World
shares6 views
World
shares6 views

Hundreds walk out of Harvard College graduation; UCLA contends with new protest

Rajendran Achuthan - May 24, 2024

[ad_1] LOS ANGELES — The end of encampments at some American college campuses this spring was not the end of pro-Palestinian…

King Charles ‘hurt’ by Prince Harry’s decision to publicly snub him at event | Royal | News
Top Stories
shares7 views
Top Stories
shares7 views

King Charles ‘hurt’ by Prince Harry’s decision to publicly snub him at event | Royal | News

Rajendran Achuthan - May 24, 2024

[ad_1] King Charles is said to be "hurt" by Prince Harry's latest move, during which he appeared to publicly 'snub'…

Vinted user gets brutal response after refusing to sell bikini for £2
Fashion
shares6 views
Fashion
shares6 views

Vinted user gets brutal response after refusing to sell bikini for £2

Rajendran Achuthan - May 24, 2024

[ad_1] Brits are cashing in by selling unwanted items online, with fashion enthusiasts often turning to Vinted to earn some…

2 Responses

  1. What i do not realize is in fact how you are no longer actually much more wellfavored than you might be right now Youre very intelligent You recognize thus considerably in relation to this topic made me in my view believe it from numerous numerous angles Its like men and women are not fascinated until it is one thing to do with Lady gaga Your own stuffs excellent All the time handle it up

    Reply
  2. Hi Neat post Theres an issue together with your web site in internet explorer may test this IE still is the marketplace chief and a good component of people will pass over your fantastic writing due to this problem

    Reply

Leave a Comment

Your email address will not be published.