March Consumer Prices

The Commerce Department released the March figures for the Consumer Price Index (CPI).  It was no surprise that the index continued to climb as the cost of living has been in the headlines frequently this year.  Month-over-month, costs grew 0.5 percent.  This follows February’s increase of the same amount.  Year-over-year the prices of goods and services have gone up by 2.7 percent which is the largest twelve month increase since December 2009.

The largest portion of the increase is attributed to gasoline and food.  Gasoline increased 5.6 percent.  It has gone up in each of the last nine months, surged 14.4 percent in the last three months alone, and 27.5 percent over the last year! Food and beverages increased by 0.7 percent after growing by 0.6 percent the month before. The cost to eat at home jumped 1.1 percent for the month.

Taking out the normally volatile food and energy components leaves us with the more glacially changing “core” CPI.  It did not change its pattern as it grew slower than the previous two months with an increase of 0.1 percent month-over-month. Year-over-year it is up 1.2 percent.  This type of slow core inflation change is not enough to alarm the central bankers especially as the unemployment rate remains stubbornly high. The concern is that the continued acceleration of food and energy costs will take away from consumption in other areas of the economy since the two have only been moving in one direction as of late.  Unfortunately our economy cannot survive on food and energy alone.