The cost of living continued to move higher in March, fueled by rising prices of gasoline, food, and housing.
The Labor Department reports that the Consumer Price Index (CPI) rose 1.2% from February to March and is up 8.5% over the last 12 months, the highest annual inflation reading since 1981.
The price of gasoline rose by 18.3% in March and was a major driver of inflation; it has increased by 48% over the last 12 months. The food index rose 1%, and the cost of food prepared and consumed at home gained 1.5%.
“The shelter index was by far the biggest factor in the increase, with a broad set of other indexes also contributing, including those for airline fares, household furnishings and operations, medical care, and motor vehicle insurance,” the Labor Department said in its release.
The only good news in the March numbers was the price of used cars. After months of steady increases due to the new car shortage, the index for used cars and trucks fell 3.8% over the month. But economist Joel Naroff, of Naroff Economics, says the March inflation report should be a wake-up call.
“The scary part is we’re pushing toward double-digit inflation and no one wants to see that,” Naroff told ConsumerAffairs. “No one wants to see 8.5% inflation.”
Naroff says housing inflation is being driven by a shortage of homes for sale, which has pushed prices consistently higher.
“I mean, you’re talking about a six month supply of houses in most places, less than that in some areas,” he said. “Houses are on the market three to five days and if you’re on the market more than five days people wonder what’s wrong with your house.”
More pressure on the Fed
The latest inflation numbers, while not unexpected, will likely put even more pressure on the Federal Reserve to take action to curb rising prices. The Fed is widely expected to hike the federal funds rate by 50 basis points at next month’s meeting.
Naroff said he would not rule out a 75 basis point hike, which would further increase the borrowing costs on auto loans and credit card payments. It all adds up, he says, to growing financial pressure on consumers.
“If you go through the details of food costs, every category is showing large increases over the year,” Naroff said. “With rent also jumping, the staples of life, food, energy, and shelter, are likely forcing some people to do without.”