Key inflation gauge up 6.6% in March
WASHINGTON — An inflation gauge closely tracked by the Federal Reserve surged 6.6 percent in March compared with a year ago, the highest 12-month jump in four decades and further evidence that spiking prices are pressuring household budgets and the health of the economy.
Yet there were signs in Friday’s report from the Commerce Department that inflation might be slowing from its galloping pace and perhaps nearing a peak, at least for now.
And despite soaring prices, consumer spending rose faster than inflation for a third consecutive month, suggesting that rising prices haven’t cooled the desire of Americans to shop. The pandemic’s distortions to the economy are also fading as consumers shift their spending back to experiences like travel, concerts and dining out. That follows a twoyear surge of pandemic spending on goods, things like exercise bikes, patio furniture and standing desks.
The switch to services helps restrain inflation because prices are rising more slowly for services than for goods.
Excluding the especially volatile food and energy categories, socalled core prices rose 5.2 percent in March from a year earlier. That was slightly below the 5.3 percent year-over-year increase in February, and it was the first time that 12-month figure has declined since February 2021, before the inflation spike began. And on a month-tomonth basis, core prices rose 0.3 percent from February to March, the same as from January to February. Previously, it had risen by a half-point for four straight months.
“The slowdown in (core inflation) is really nice to see,” said Bill Adams, chief economist for Comerica Bank, in an email to clients. “Inflation may have peaked in March, although the evidence is still a little ambiguous. But inflation’s momentum is still very strong.”
Overall inflation jumped 0.9 percent in March from February, the biggest one month gain since 2005. Gas prices soared 18 percent just in March. But they have since fallen a bit this month, another sign inflation may start to slowly decline.
Consumers increased their spending by 1.1 percent last month, more than many economists had expected. The gain largely reflected higher prices at the gas pump, grocery store and other places where Americans shop for necessities. But even adjusted for inflation, spending rose 0.2 percent.
Sharp gains in wages and salaries are helping many consumers handle higher costs. A separate report Friday from the Labor Department showed that employees’ pay and benefits jumped 1.4 percent in the first three months of the year, before adjusting for inflation. That was the highest such increase on records dating back two decades.
Yet the gain isn’t big enough to completely offset higher prices. In the past year, wages and benefits have jumped 4.7 percent. But after adjusting for inflation, they are down 3.7 percent.
That decline helps explain why Americans are taking an increasingly negative view of the economy. About one-third of respondents to a Gallup poll, released Thursday, cited inflation as the most important financial problem their family faces today, up from fewer than one in 10 who said so a year ago.
Consumers are maintaining their spending by digging into the extra savings they built up during the pandemic. The saving rate fell to 6.2 percent in March, the lowest level since 2013.