March Consumer Prices

The Labor Department said their consumer price index in March rose just 0.1%, after remaining unchanged in February.  This negligible change was caused by a slight rise in food costs while energy prices remained the same as before.  Obviously, at least to me, prices at the pump have gone up so we may see this component rise in next month’s report unless other energy costs like heating oil offset the jump.  Year-over-year the headline CPI is up 2.4% seasonally adjusted, a slight increase over February, some of which can be attributed to the statistical method used in its calculation.  At the core level, which subtracts out energy and food, the CPI was unchanged.  Apparel costs fell a bit and housing stayed flat.  Remarkably, this latter component has been flat or negative an unprecedented four consecutive months, underlining one of the biggest drags on the current recovery.  With the core reading up just 1.2% Y/Y, look for some commentators to begin discussing the negative ramifications of deflation.  This weakness provides the Federal Reserve with a strong argument for keeping interest rates near zero for a long time to come.