Inflation jumped in March due to higher gasoline prices and rising food costs.
The Labor Department reports that the Consumer Price Index (CPI) rose 0.4 percent in March, twice the rate of February’s increase. Despite the sizable increase, inflation over the last 12 months is still running just under the Federal Reserve’s target of 2 percent.
Consumers saw the biggest price hikes last month in gasoline and other energy costs. That category was up 3.5 percent, accounting for about 60 percent of the seasonally adjusted all items monthly increase.
The index tracking gasoline prices rose sharply, along with the electricity index. With the heating season mostly over, natural gas prices were slightly lower.
Higher food costs
Food costs were higher last month, rising 0.3 percent. That follows a 0.4 percent increase in February. Most of the higher costs were in the produce section, with fresh vegetables rising 2 percent and fresh fruit going up 1.2 percent.
Despite the monthly rise in the CPI, Robert Frick, corporate economist for Navy Federal Credit Union, says inflation is still fairly tame, given the slow rise in wages.
“The index for all items except food and energy was up just 0.1 percent,” Frick told ConsumerAffairs. “The difference between this core number and headline number was mainly due to the energy index rising 3.5 percent in March. The food index also showed an increase, and in the last year that portion of CPI was up 2.1 percent, the most since 2015.”
Nothing to alarm the Fed
The CPI strips out food and energy costs from its main inflation number because those two sectors tend to be highly volatile. Frick says rising food costs may be a sign of economic health because consumers feel confident enough to splurge at the supermarket and at restaurants.
“These steady-as-it-goes numbers should have little effect on the Federal Reserve's decision to raise, lower or stand pat on rates,” he said.
Two sectors that were down in February were back up in March. Medical care costs rose 0.3 percent last month, largely due to a 0.6 percent jump in the cost of prescription drugs.
New car costs were 0.4 percent higher last month after giving ground in February. Meanwhile, clothing prices dropped 1.9 percent in March after going up in February.