U.S. Inflation Slowed Sharply in March While Core Index Fell

(Bloomberg) -- U.S. inflation slowed sharply in March as the coronavirus helped push down fuel and other costs, while an underlying gauge of consumer prices posted the first monthly drop in a decade.

The consumer price index fell 0.4% from the prior month and rose 1.5% annually -- down from a 2.3% year-over-year gain in February -- as energy prices dropped by the most in five years, reflecting one of the sharpest-ever collapses in oil prices, Labor Department data showed Friday.

The core index, which excludes volatile food and energy costs, was down 0.1% from the prior month -- the first decline since early 2010 -- and up 2.1% from a year earlier.

U.S. Inflation Slowed Sharply in March While Core Index Fell

Key Insights

  • Airfares posted a record monthly decline of 12.6%, apparel was down a record 2% and new car prices dropped 0.4% as the pandemic began altering spending patterns, incomes and product supplies. Food costs rose 0.3%.
  • Energy prices fell 5.8% from the prior month as gasoline costs plunged 10.5%, the biggest drop in four years. That also reflected a price war between Russia and Saudi Arabia.
  • Prices for lodging away from home -- mainly hotels -- fell 6.8% from the prior month, a record drop. The broader shelter category was unchanged -- the first time since 2010 it failed to rise -- while rents and owners’ equivalent rent each rose 0.3%.
  • Economists expect inflation to slow without a slide into deflation. Forecasters surveyed by Bloomberg over the past week see the Federal Reserve’s preferred measure of core prices -- a separate gauge from the Commerce Department -- rising 1.2% this year. The central bank targets 2% inflation.

What Bloomberg’s Economists Say

“Falling inflation is a by-product of an economic downturn, and as such will be less of a concern for the Fed at this juncture; mitigating the direct impacts of the engineered economic shutdown comes first.”

-- Yelena Shulyatyeva and Andrew Husby

Click here for the full reaction note.

Other Details

  • The category of household cleaning products posted a 1.1% monthly increase, the most since 2011 -- potentially reflecting the rush for hand sanitizer and soap. Meanwhile, indoor plants and flowers jumped 2.1%, the most since 2001.
  • A separate Labor Department report on Friday showed average hourly earnings, adjusted for price changes, rose 1.6% in March from a year earlier after 0.6% in February.

©2020 Bloomberg L.P.

BQ Install

Bloomberg Quint

Add BloombergQuint App to Home screen.