The 0.6% monthly rise in March is the sharpest in more than eight years.

By Manuel Gutierrez, Consulting Economist to NKBA

Consumer prices have been increasing at a faster rate each month since November 2020. In March, the Consumer Price Index, the common measure of price inflation, rose by 0.6% from February. This has resulted in the highest monthly rate in more than a year (Figure 1).

Additionally, it is the fastest one-month price increase in close to nine years, since September 2012. Figure 1 shows that prices were actually declining a year ago, as a consequence of the drop in consumer demand caused by the pandemic shutdown. Consumers virtually stopped shopping, with retail sales collapsing 26% between February and April of last year. Those sales rebounded strongly, however, the following month, catapulting by 18% in May.

Consumer prices rise by 0.6% in March, the sharpest increase in 8 ½ years.

The 0.6% overall price increase in March was led by several categories that have been rebounding from last year’s anemic levels. Energy prices advanced by 5% in March and are 13.2% ahead of last year. Financial Services rose by 4.1% for the month, although they remain 0.3% behind last year (Figure 2).

Transportation Services had the third-highest price increase of all categories in March, up 1.8% from the prior month. Overall, Transportation Services has yet to recover from the stay-at-home practices maintained by consumers over the last year, and are off by 1.6% in the 12-month period.

Other categories with price declines are Apparel and, surprisingly, Windows and Flooring.

Apparel is down 0.3% for the month and a larger 2.5% from a year ago, likely caused a decreased need for work clothes in the work-from-home era, or for apparel to wear to occasions (cancelled) or going out in the evenings (venues closed).

Windows & Flooring used in housing had the biggest decline among all products both for the month and for the past year. It is 0.3% below the prior month but 3.4% lower than a year ago.

Focusing on residential, total Housing costs have been rising faster than the overall CPI for the last 10 years. Cumulatively, the composite index for Housing is up 28% since 2010, six points higher than the overall 22% rise in CPI over the same period. That gap began in 2015, as shown in Figure 3, where three specific industry categories are also tracked.

In Figure 3, price trends for Windows and Flooring are tracked separately, unlike in Figure 2, where they are treated as one unit. Price trends for both have been declining since 2010. Windows, off by 21%, has declined much more sharply than the 4.5% for flooring.

Household Appliances is the third category showing price declines, down by 5.1% overall since 2010, although it has been climbing since 2018.
As demand for housing continues to increase, with consumers purchasing new and existing homes at faster rates, the expectation is for further price increases for these products.

Consumer price changes differ widely among the nine U.S. Census divisions. They range from a low 1.8% increase over the last year in the New England region, to a high 4% increase in the East South-Central region (which includes Mississippi, Alabama, Tennessee and Kentucky.

Last year’s regional price changes do not reflect the trend for the latest three years, shown in the left panel of Figure 4. The two regions where prices have risen fastest since 2018, Pacific and Mountain — both in the west — had below average increases over the last year (right-hand panel).

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