Consumer Prices in U.S. Fall 0.3%, First Decline in a Year

The cost of living in the U.S. declined in March for the first time since February 2016, showing inflation is moving up only gradually, a Labor Department report showed Friday.

Key Points

  • The consumer-price index decreased 0.3 percent (forecast was unchanged) following a 0.1 percent advance the prior month
  • From a year earlier, prices were up 2.4 percent (forecast was 2.6 percent) after a 2.7 percent gain
  • Excluding food and energy, the so-called core CPI fell 0.1 percent from the prior month, the first decrease since January 2010
  • Core rate was up 2 percent from March 2016

Big Picture

The decline -- reflecting cheaper motor vehicles, wireless phones services and apparel -- interrupts a recent pickup in inflationary pressures. Businesses have been regaining some pricing power on the heels of improving global demand and steady sales in the U.S. The Federal Reserve’s preferred gauge of inflation, a separate figure that’s based on what consumers purchase, exceeded its 2 percent goal in February, though some officials focus on the measure excluding food and energy, which is still below their target. The year-over-year gain in the March core CPI was the smallest since November 2015.

Economist Takeaway

“One very soft month does not make a new trend, though, so we will be looking for a clear rebound in April,” Ian Shepherdson, chief economist at Pantheon Macroeconomics Ltd., said in a note after the report. “Another month like March, though, and a June rate hike will become much less likely.”

Other Details

  • Energy prices fell 3.2 percent from previous month, reflecting a 6.2 percent slump in gasoline
  • Food costs rose 0.3 percent with grocery prices rising the most since May 2014
  • The CPI for used vehicles dropped 0.9 percent, the biggest drop since December 2014, and were down 4.7 percent from a year ago
  • Shelter costs rose 0.1 percent, the least since June 2014 and held down by a 2.4 percent drop in prices of hotel stays
  • Hourly earnings adjusted for inflation rose 0.3 percent from March 2016, after no change in February, a separate report from the Labor Department showed

— With assistance by Alexandre Tanzi

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