US March CPI Posts Sharp Monthly Jump as Energy Prices Spike

Headline Inflation Driven by Energy Costs

Headline Consumer Price Index (CPI) inflation in March was 3.3% higher than a year earlier and up 0.9% from February, according to Labor Department data released Friday. Both readings matched economists’ expectations collected by Bloomberg, which had called for a 3.4% annual increase and a 0.9% monthly gain.

The rise was “almost entirely” driven by energy, as the US-Israel war against Iran pushed gasoline prices above $4 a gallon and left the vital Strait of Hormuz largely closed. The gasoline index surged 21.2% in March, accounting for nearly three-quarters of the overall monthly CPI gain. The Labor Department reported that this was the single-largest monthly increase in gasoline prices since the series began in 1967.

Claudia Sahm, chief economist at New Century Advisors, described current conditions as a “whiplash economy” in comments to Yahoo Finance.

Core Inflation and Sector Details

On a core basis, excluding food and energy, prices rose 0.2% from February and 2.6% from a year earlier, both slightly below economists’ expectations of 0.3% and 2.7%, respectively. The relatively subdued core reading contrasted with the sharp jump in energy-related components.

Market participants had anticipated strong inflation data. Alexandra Wilson-Elizondo, multiasset solutions global co-head at Goldman Sachs Asset Management, said the market had been “braced for a hot print,” characterizing the in-line result as a “slight relief.” She added that March’s headline figure “may be the best headline inflation number we see for a while,” noting that it may only partially reflect the impact of the conflict, which pushed US crude and gasoline up 70% at peak.

Within other CPI components, airfares increased 2.7% on the month. The overall food index was flat, though individual categories diverged: tomato prices rose 15.3%, while hot dog prices fell 3.6%.

FAQ

What was the US headline CPI inflation rate in March?
The headline CPI rose 3.3% year over year and 0.9% month over month in March, the largest monthly gain since 2022.

What drove the sharp increase in inflation?
The increase was driven primarily by energy costs, especially gasoline, which rose 21.2% and accounted for nearly three-quarters of the monthly gain, amid disruptions linked to the US-Israel war against Iran and the partial closure of the Strait of Hormuz.

How did core inflation perform compared with expectations?
Core CPI, which excludes food and energy, rose 0.2% from February and 2.6% from a year earlier, slightly below economists’ forecasts of 0.3% monthly and 2.7% annual increases.

How did other price categories move in March?
Airfares increased 2.7% from February. The overall food index was unchanged, with notable divergences such as a 15.3% rise in tomato prices and a 3.6% decline in hot dog prices.