Strongest Pace since September
- Topline CPI grew at a 0.4% pace in March 2024 versus the month prior in seasonally-adjusted terms.
- Core CPI, less Food & Energy, also posted a 0.4% monthly gain in March 2024 – it’s 3rd consecutive 0.4% monthly reading.
- Energy CPI pushed higher in March 2024, up by 1.1% versus February.
- Services less Rent of Shelter continued its new year push with further acceleration to a +0.8% monthly gain in March 2024.
Consumer Price Index (CPI) inflation came in at +0.4% in March 2024 versus February on a seasonally adjusted basis. This translates to a 3.5% gain versus one year ago, continuing the trend higher that has marked the early months of 2024. Core CPI inflation also rose by +0.4% for the month and remains stubbornly set at just under 4% on a year-ago basis (+3.8%). The Fed’s targeted average of 2.0% year-over-year inflation remains well off from March’s core inflation result, undermining arguments in favor of more urgent Fed easing.
Core CPI inflation’s steady 0.4% monthly growth rate throughout the early months of 2024 equates to an annualized pace of inflation at 4.4%. Tracking the extrapolated monthly pace as opposed to year-over-year results provides a more focused view of current conditions, rather than wading through the potential volatility of inflationary influences that are now baked into baseline economic performance assumptions. After falling to an annualized pace of 2.4% in June of last year, core inflation has seen a steady rise, peaking thus far at a 4.8% annualize pace to open this year in January. The usual suspects of Housing and Services less Rent of Shelter have underpinned inflation’s renewed assault on household budgets.
Energy prices were again up sharply in March 2024, posting a 1.1% gain for the month on the heels of February’s 2.3% monthly jump. With oil prices now marching higher, energy costs will be taking an ever-increasing bite out of household budgets in the months to come. Gasoline prices rose by 1.7% in March. Though not part of the Core CPI metric that aligns with the Federal Reserve’s inflation targeting mandate, energy prices are nonetheless influential on the health of household balance sheets – especially as more workers have resumed a regular commute for in-office work. Higher energy prices remain inescapable both at home and on the road, leaving less disposable income for households to support consumer spending and likely forcing further credit card debt accumulation in order to maintain spending habits.
The disconnect between the cost of groceries and dining out reinforced itself in March 2024. While Food & Beverages CPI was up only 2.2% versus one-year ago (a +1.2% annualized monthly gain), the Food Away from Home subcategory’s +0.3% jump accounted for all of the broader metric’s gain and even offset a second consecutive month of flat Food at Home prices. Wage growth in Leisure & Hospitality industries, including restaurants, reaccelerated above total average wage growth for the U.S. economy in the fourth quarter of last year and has maintained that gap higher throughout 2024 thus far. Higher labor costs have pressed restaurants to raise prices for their patrons. And consumer demand for take-out that consistently matches and outpaces overall retail spending – despite far weaker price trends for groceries – will allow restaurants to continue to hike menu prices.
There are fewer dovish than hawkish tones being sounded among Fed officials regarding the pace of monetary policy easing in 2024. PNC is forecasting three (3) rate cuts this year, in June, September and December. But the March 2024 CPI inflation reading adds to mounting data evidence pushing back against even that outlook as being too optimistic with respect to lower interest rates this year.
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