Consumer prices soared into the stratosphere again in March and the only consolation is that this painful cost spike may have peaked.
Inflation hit a new 40-year high as gasoline, food and lease costs more than compensate for the moderation in used car prices.
The consumer price index jumped 8.5% a year, the fastest pace since December 1981, the Labor Department said Tuesday. That’s up from February’s 7.9% and inflation has now hit new 40-year highs for five straight months.
Prices rose 1.2% from their February level, the largest monthly increase since September 2005.
Gasoline prices were the main culprit, jumping 18.1%. Average unleaded gasoline set a record high of $4.33 a gallon last month before falling back to $4.11 on Monday, according to AAA. Prices at the pump increased by 48% compared to the previous year.
Russia’s invasion of Ukraine fueled last fall’s inflationary spurt by reducing Russian oil supplies and intensifying supply chain bottlenecks, particularly for energy , wheat and other raw materials shipped from the region.
Meanwhile, labor shortages in the United States are prompting companies to raise wages sharply to attract job applicants, leading them to raise prices to maintain profit margins.
Excluding volatile food and energy products, so-called basic prices increased by 6.5% per year in March, the strongest increase since August 1982. On a monthly basis, basic prices increased by 0.3%
Wells Fargo and Barclays believe inflation likely peaked in March. A waning pandemic should help ease supply groans and labor shortages this year, economists said.
But don’t celebrate right away. “Inflation’s descent is going to be painfully slow,” says Wells Fargo economist Sam Bullard.
And the war could prolong supply problems and outsized price gains longer than expected, according to Barclays economist Pooja Sriram. Barclays estimates that annual inflation will still be 6.4% in June and 4.4% at the end of the year.
On the positive side, prices for goods — other than food and energy — are moderating, Bullard says. But prices for restaurants, housing and other services are rising as the pandemic subsides and more Americans dine out, travel and do other activities, Sriram says.
