Inflation Accelerated to 8.5% in March The consumer-price index surged to a new four-decade high in March from the same month a year ago, driven by skyrocketing energy and food costs, supply constraints and strong consumer demand.
(…) The so-called core price index, which excludes the often-volatile categories of food and energy, increased 6.5% in March from a year earlier—up from February’s 6.4% rise, and the sharpest 12-month rise since August 1982.
Economists and investors are looking for evidence the inflation surge that started in early 2021 is close to a peak. One possible early sign came from the monthly change in the core index. It rose 0.3% in March from the prior month, the slowest pace in six months, driven by a 3.8% decline in used vehicle prices.
Another encouraging sign was that airline fares, hotel prices and other more volatile categories drove much of the price gains for services, while pressure from categories such as housing, which tend to be more persistent, eased, said Blerina Uruci, U.S. economist at T. Rowe Price Group Inc.
However, Ms. Uruci added that supply-chain constraints continue to push prices up, except for an easing of the costs for used cars. (…)
U.S. airline fares leapt 10.7% in March from February, accelerating as travel demand recovered from the last Covid-19 wave. Air-travel prices were 23.6% higher than they were a year earlier.
Auto prices, which have powered much of the inflationary surge, eased in March. New vehicle prices decelerated on a one-month basis, rising 0.2% in March from the prior month. However, the 12.5% 12-month increase was the sharpest since 1975. Despite the monthly decline in used-vehicle prices, those were still up 35.3% from a year earlier. (…)
I showed this chart 2 days ago but it now includes March data: it shows the MoM changes in total CPI (red) and CPI-ex-vehicles. Note the large impact vehicles had in April, May and June 2021 when their big spikes occurred.
Note also that CPI-ex-vehicles is gradually taking over and rising faster than total CPI: February, +0.84% vs +0.80%, March, +1.43 vs +1.24%.
The other risk is that inflation builds up in services as wages accelerate. CPI-Services was stable between 2.0-2.5% a.r. but is now rising at a 6.0% a.r..
Pundits like to zero in on some specific data points to try to prove a point. The statement above that “pressure from categories such as housing, which tend to be more persistent, eased” gives the impression that not only housing inflation is easing but that there are several other items decelerating.
The BLS is kind enough to offer several special categories to help us see through the maze:
- Rent of primary residence: +0.4% in March, from +0.5% on average in Jan-Feb.
- Owners’ equivalent rent: +0.4% in March, from +0.4% on average in Jan-Feb.
- Housing: +0.7% in March, from +0.6% on average in Jan-Feb.
- CPI ex-food, shelter, energy, and used
cars and trucks: +0.6% in March, from +0.65% on average in Jan-Feb. - Services ex-rent: +0.9% in March, from +0.65% on average in Jan-Feb.
- Medical care: +0.5% in March, from +0.45% on average in Jan-Feb.
I also have my own CPI-Essentials series (food, energy, shelter), what really impacts ordinary people. It is up 8.6% in March after +1.8% MoM in March alone
CPI-Essentials (YoY)
This ING chart offers a good overview:
Contributions to annual US inflation rate
Source: Macrobond, ING
The Atlanta Fed’s sticky-price consumer price index (CPI)—a weighted basket of items that change price relatively slowly—increased 5.8 percent (on an annualized basis) in March, following a 6.5 percent increase in February. On a year-over-year basis, the series is up 4.7 percent.
The BLS also informed us that real weekly earnings decreased 0.8% MoM in March, the 6th straight monthly decline, totalling -2.3% or -4.6% annualized.
Tomorrow, we get March retail sales in the U.S.. Brace yourself if the Chicago Fed’s latest CARTS release is anywhere near reality:
In the fourth week of March, the Weekly Index of Retail Trade decreased 0.1% on a seasonally adjusted basis after remaining unchanged in the previous week. For the month of March, retail & food services sales excluding motor vehicles & parts (ex. auto) are projected to decrease 2.9% from February on a seasonally adjusted basis and to decrease 4.2% when adjusted for inflation.
The Chase card spending tracker estimates that Control Sales were up 1.3% MoM in March. Using the Chicago Fed’s measure of retail inflation, real Control Sales would be flat in March after being down 1.2% in February.
Fed official: It’s ‘fantasy’ to think modest rate rises will tame inflation James Bullard says US central bank must put brakes on economic activity to tackle surging prices
- UK inflation hits 7% as fuel prices surge
- Inflation Wave Reaches Asia With Signs Worst Is Yet to Come The world is now facing a synchronized inflation outbreak as food and energy prices surge in Asia, a shift from just a few months ago when the region appeared to avoid the price fever gripping the U.S. and parts of Europe.
- New Zealand Lifts Interest Rate By Half-Point as Inflation Fight Heats Up The Reserve Bank of New Zealand left the door open to a further half-percentage-point increase next month as it seeks to cool rising inflation.
Russia’s Oil Industry, Linchpin of Economy, Feels Sting of Ukraine War Disruptions Refiners are trimming output and in some cases closing down because of falling demand at home and abroad.
(…) Storage space is running low in pipelines and tanks. Wells, which pump from some of the world’s biggest crude reserves, are dialing down production.
The losses so far are modest, and overall the industry continues to generate massive amounts of revenue for Moscow. But the problems of getting crude from the ground to end users are likely to mount in the coming months, traders and analysts say.
In the latest indication of problems ahead, the International Energy Agency forecast Wednesday that from May, almost 3 million barrels a day in Russian production will be turned off. That would reduce output to fewer than 9 million barrels a day, a larger pullback than other analysts have predicted. (…)
The IEA said there was no indication yet that China is racing to import barrels being shunned by longtime buyers of Russian oil. (…)
“There is the risk you permanently lose some production potential,” said Helge André Martinsen, senior oil analyst at DNB Markets. (…)
With fewer places for their crude to go, Russian producers are cutting back. Output of crude and condensate has fallen to 10.5 million barrels a day, said Amrita Sen, co-founder of Energy Aspects. That is down from 11.1 million barrels a day before the Feb. 24 invasion and compares with global oil demand of roughly 100 million barrels a day. (…)
There are signs the country is adapting fast to lost demand in the West, sending more shipments of crude to Turkey and India among other countries.
Oil producers in Russia have recovered from setbacks in the past. (…)