The CPI index accelerated to 2.6% over one year in March, in particular following the rise in gasoline prices of 9.1% compared to February.
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The economic recovery that began in the United States pushed up consumer prices in March, especially gasoline, marking the start of a movement that was expected and should last for several months.
Inflation over one year has accelerated sharply, to 2.6%, its fastest pace since the fall of 2018, according to data released Tuesday by the Department of Labor.
The gap is indeed large, when we compare the prices of March 2021 to those of March 2020, which had fallen under the effect of the containment measures.
The demand for fuels, plane tickets, tourist accommodation, or even clothing, had plunged when the American population was ordered to stay at home, in the face of the progression of the COVID-19 pandemic in the country.
This price increase is linked to the economic recovery in the United States, where nearly a quarter of the population is now fully vaccinated. In addition, some Americans have more money thanks to savings on outings and trips made last year or to the financial boost from the federal government as part of the various stimulus plans.
Prices have also increased due to disruptions in the global supply chain, which causes manufacturing and delivery delays.
Continuous rise for several months
Compared with February, inflation accelerated to + 0.6%, its fastest pace since August 2012.
In particular, gasoline prices jumped, by 9.1% from February.
Certain sectors particularly struggling for a year seem to see demand rebound: prices have climbed for tourist hotels (+ 3.8%), car rental (+ 11.7%), or even auto insurance (+ 3.3%).
Without taking into account volatile energy and food prices, so-called core inflation is also accelerating, to 0.3% over one month (0.1% in February) and 1.6% over one year (1.3% in February).
The index measuring food prices rose 3.5% year on year, that measuring energy prices jumped 13.2%.
The movement should therefore continue, since the economic recovery and supply difficulties should, “in the coming months, (…) continue to increase the rate of inflation to 3.5% year-on-year” , commented Kathy Bostjancic, chief economist for Oxford Economics, in a note.
“Soaring air passenger numbers and hotel occupancy rates are a clear sign of rising prices, while auto insurance costs will rise as people drive back to work,” said Ian Shepherdson, economist for Pantheon Macroeconomics.
Eye on the Fed
These elements make the markets fear too high inflation, but many economists want to be reassuring, and believe that this increase will be only temporary.
The economic advisers of the White House anticipate, like the American Central Bank (Fed) or the IMF, “a modest rise in inflation (…) which will then slow down”.
The ball is now in the Fed’s court, which is aiming for a target of 2% annual inflation – according to the PCE index and not the CPI. However, she believes that inflation must exceed 2% for a certain period of time, in order to stabilize after a quarter of a century of too low inflation.
It has already announced that it is not close to raising its interest rates, to the chagrin of the markets, as this could jeopardize the achievement of its other goal, full employment.
“This idea will be valid for a while, but if the rise in inflation persists, and especially if it is accompanied by faster growth in wages, the Fed line will become untenable,” said Mr. Shepherdson.
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