CPI Surges: Energy & Services Drive Unexpected Inflation Jump

CPI Surges: Energy & Services Drive Unexpected Inflation Jump 

After consistently rising month-over-month for the past five months, the Consumer Price Index (CPI) was anticipated to show a modest slowdown in March, from a 0.4% increase to a 0.3% increase. However, it unexpectedly rose by 0.4%, equaling the highest level since August 2023, resulting in a 3.5% year-over-year increase. Energy and services were the main drivers of this increase, with energy flipping from year-over-year deflation. Core CPI also exceeded expectations, rising by 0.4% month-over-month and pushing the year-over-year movement to 3.8%. While goods costs continued to deflate on a year-over-year basis, services saw a re-acceleration. The surge was primarily led by energy and shelter costs.

In March, the index for shelter and gasoline contributed to over half of the monthly increase in the index for all items. Additionally, the energy index rose by 1.1% over the month, while the food index rose by 0.1%. The food at home index remained unchanged, while the food away from home index rose by 0.3%.

The index for all items less food and energy rose by 0.4% in March, as it did in the previous two months. Notable increases were observed in indexes such as shelter, motor vehicle insurance, medical care, apparel, and personal care. Conversely, indexes for used cars and trucks, recreation, and new vehicles decreased over the month.

On a year-over-year basis, the index for all items less food and energy increased by 3.8%, with notable increases in motor vehicle insurance, medical care, recreation, and personal care. The shelter index rose by 5.7% over the last year, contributing to over sixty percent of the total 12-month increase in the all items less food and energy index.

Furthermore, the SuperCore index, which excludes shelter, surged by 0.7% month-over-month, reaching 5.0% year-over-year, the highest since April 2023. Every sub-component in SuperCore rose on both a month-over-month and year-over-year basis.

Consumer prices have not fallen in a single month since President Biden's term began, resulting in an overall increase of over 19%, with an average annual rise of 5.6%. This surpasses the average annual rise during President Trump's term. Concerns arise regarding the sustainability of this trend and its potential implications, especially in the context of ongoing economic policies.