Consumer Price Index: Yearly Inflation Rate 2.7% in March 2011

The Consumer Price Index (CPI) rose 2.7% year-over-year (YoY) in March 2011 – slightly higher than Econintersect’s expectations (analysis here of March PPI) but in line with consensus estimates.

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.5 percent in March on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 2.7 percent before seasonal adjustment.

Gasoline and food prices continued to rise and together accounted for almost three quarters of the seasonally adjusted all items increase in March. The gasoline index posted its ninth consecutive increase and has now risen 14.4 percent over the last three months. The household energy index rose as well, with advances in the fuel oil and electricity indexes more than offsetting a decline in the index for natural gas. The food at home index continued to accelerate in March, rising 1.1 percent as all six major grocery store food groups increased.

The index for all items less food and energy rose 0.1 percent in March, a smaller increase than in the previous two months. The index for shelter rose slightly, as did the index for medical care. Several transportation indexes posted significant increases, including new vehicles, used cars and trucks, and airline fares. In contrast, the indexes for apparel and for household furnishings and operations both declined in March.

The all items index rose 2.7 percent in the last 12 months, the largest increase since December 2009.

The energy index has now risen 15.5 percent over the last 12 months, with the gasoline index up 27.5 percent. The food index has risen 2.9 percent with the food at home index up 3.6 percent. The index for all items less food and energy has increased 1.2 percent with the shelter index up 0.9 percent.

Many economists view price increases using core (price increases less food and energy).  Econintersect has analyzed this approach showing that food moves synchronously with core.  Remember 36% of the CPI is housing based (41% including energy) with 17% food and about 10% of the index is energy related.

The Federal Reserve has argued that energy inflation automatically slows the economy without having to intervene with its monetary policy tools.  This is the primary reason the Fed wants to exclude energy from analysis of consumer price increases (the inflation rate).

For the consumer, it could be argued that 2.7% annual inflation rate is grossly understated.  Both import and export prices are up over 9% (analysis here) – and this covers the goods the consumer buys daily.  Consumers are hunkering down (analysis here).

Related Articles

Producer Price Index More Moderate Than Expected  by Steven Hansen

Beware:  Core CPI Follows Food Inflation  by Steven Hansen

Study Says Fed Does Not Need to React to Inflation Caused by Commodity Prices  (GEI News)

PPI Does Not Look Good  by Steven Hansen

CPI Increases 2.1%:  Trend Line Up  by Steven Hansen

Producer Price Index Moderates in January 2011  by Steven Hansen

Energy Surging into PPI Future by Steven Hansen