Rent and energy prices were leading factors in March’s positive inflation news.
- As we previously reported, the inflation rate for March was up 4.98% from the previous year, reflecting a decline from the peak yearly inflation of 9.1% in June 2022.
- A 17.4% decline in gas prices contributed to a 6.4% decrease in energy prices in the past year, Axios reports.
- The monthly pace of rent growth has also decreased, down from 0.8% fall year to 0.5% in March.
- Rent is still up, having raised 9% in the past 12 months, but the slowing rate of growth could be a positive indicator of improvement, Axios notes.
Why It’s News
The Consumer Price Index (CPI) measures the cost of living over time for basic consumer goods and services. It draws upon monthly average prices for food, housing, clothing, transportation, medical care, recreation expenses, communication, and education. Its rapid increase in the past two years has reflected a highly inflationary economy in the aftermath of the COVID-19 crisis and multi-trillion dollar stimulus spending.
The Bureau of Labor Statistics counts shelter in 40% of its consideration of the CPI’s movement. Recent improvements contributed to significant gains in the lowering rate of inflation growth, even as inflation continues to raise prices. “The index for shelter was by far the largest contributor to the monthly all items increase,” says the Bureau.
“The rapid cooldown in rent growth continues to show up everywhere except in the one place that arguably matters most,” says RealPage Economist Jay Parsons.
Bad news in the energy sector could reflect poorly on April’s CPI percentage. Despite nine months of gradual improvement, the U.S. stands to face an energy crisis due to OPEC+’s decision on April 2 to cut oil production. The U.S. has already depleted its strategic oil reserve to improve gas prices amidst the 2022 midterm elections, and further shortages could increase energy prices in the coming months.
Despite Economist Kieran Clancy’s claim that “the rollover in rents is finally underway,” the recent improvements in these metrics could be undone, and America could see inflation begin to increase again.