Log in
E-mail
Password
Remember
Forgot password ?
Become a member for free
Sign up
Sign up
New member
Sign up for FREE
New customer
Discover our services
Settings
Settings
Dynamic quotes 
OFFON
News: Latest News
Latest NewsCompaniesMarketsEconomy & ForexCommoditiesInterest RatesBusiness LeadersFinance Pro.CalendarSectors 
All NewsEconomyCurrencies & ForexEconomic EventsCryptocurrenciesCybersecurityPress Releases

Inflation Accelerated in March Due to Strengthening Economy -- Update

04/13/2021 | 07:20am EDT

By Gwynn Guilford

U.S. consumer prices picked up sharply in March as the economic recovery gained momentum, partly reflecting higher gasoline prices.

The Labor Department said Tuesday that the consumer-price index -- which measures what consumers pay for everyday items including groceries, clothing, recreational activities and vehicles -- jumped 2.6% in the year ended March, and rose a seasonally adjusted 0.6% in March from February.

The so-called core CPI, which excludes the often-volatile categories of food and energy, climbed 1.6% over the prior year, and was up 0.3% in March from February.

"Inflation in March 2021 is still under control," said Gus Faucher, chief economist at the PNC Financial Services Group, before the report was released. "It takes time for inflationary pressures to build in the economy."

March's reading marks the start of what many economists expect to be a monthslong upswing in prices, after nearly a year of muted overall inflation as the Covid-19 pandemic doused consumer spending. Whether this rise proves temporary is one of the key questions for markets and the U.S. recovery over the next year or so, as the Biden administration, Congress and the Federal Reserve continue to provide financial support for the economy.

The Fed expects inflation to rise temporarily this year because of growing demand fueled by increased vaccination rates, falling restrictions on businesses, trillions of dollars in federal pandemic relief programs and ample consumer savings.

More than a third of Americans have now received at least one Covid-19 vaccine shot, according to the U.S. Centers for Disease Control and Prevention, and Congress last month approved another $1.9 trillion in fiscal support. On March 31 President Biden proposed spending $2.3 trillion over eight years on infrastructure and other investments.

Economists forecast real U.S. gross domestic product will grow at a seasonally adjusted annual rate of 8.1% in the second quarter, according to The Wall Street Journal's recent survey, putting the U.S. economy on track for its best year since the early 1980s. As demand rebounds, higher prices -- and, as a result, higher interest rates -- are to be expected.

The annual inflation measurements in coming months will be boosted as well by comparisons with the figures from last year, when prices dropped steeply because of collapsing demand for many goods and services -- including airfares, hotels and apparel -- as the pandemic hit the economy, many businesses closed and consumers hunkered down at home.

These so-called base effects will boost the 12-month CPI readings further in April and May, and start diminishing in June, said Rubeela Farooqi, chief U.S. economist at High Frequency Economics. "But prices will still be supported by the economy reopening, especially the service sector, which will unleash demand."

Meanwhile, rising production costs are already pushing up prices of many household goods. Kimberly-Clark Corp., the maker of Huggies diapers and Scott paper products, said last week that it will start raising prices on much of its North America consumer products to help defray higher raw-material costs. A number of other consumer-products makers -- including Cheerios maker General Mills Inc., Skippy peanut-butter maker Hormel Foods Corp. and pet-snacks maker J.M. Smucker Co. -- have indicated similar plans.

The economists surveyed expect this year's inflation pickup to prove transitory. They projected on average that annual inflation, measured by the CPI, will rise to 3% in June, which would be the highest rate since 2012, before falling to 2.6% by December.

Fed officials also expect the inflation surge to pass. Their 2% inflation target is based on a different measure: the price index of personal-consumption expenditures, which tends to run a bit below the CPI. Their latest projections show annual PCE inflation rising from 1.6% in February to 2.4% by the fourth quarter, receding to 2% in 2022 and edging up to 2.1% by the end of 2023.

The Fed has said it would start to raise interest rates from near zero when PCE inflation reaches 2% and is headed higher, and full employment has been achieved. Officials last month projected they wouldn't reach that point until after 2023.

Some economists, however, see rising risks that inflation could keep accelerating more than the Fed expects, forcing it to raise interest rates sooner than anticipated to cool price pressures.

Write to Gwynn Guilford at gwynn.guilford@wsj.com

(END) Dow Jones Newswires

04-13-21 0920ET

Stocks mentioned in the article
ChangeLast1st jan.
AUSTRALIAN DOLLAR / US DOLLAR (AUD/USD) 0.73% 0.77796 Delayed Quote.0.37%
BRITISH POUND / US DOLLAR (GBP/USD) 0.34% 1.40928 Delayed Quote.2.72%
CANADIAN DOLLAR / US DOLLAR (CAD/USD) 0.00% 0.8256 Delayed Quote.4.64%
DJ INDUSTRIAL 1.06% 34382.13 Delayed Quote.11.16%
EURO / US DOLLAR (EUR/USD) 0.57% 1.21451 Delayed Quote.-1.12%
GENERAL MILLS, INC. -0.91% 63.4 Delayed Quote.8.81%
HORMEL FOODS CORPORATION -1.77% 46.58 Delayed Quote.-0.06%
INDIAN RUPEE / US DOLLAR (INR/USD) 0.00% 0.013655 Delayed Quote.-0.55%
NEW ZEALAND DOLLAR / US DOLLAR (NZD/USD) 0.95% 0.72495 Delayed Quote.0.03%
THE PNC FINANCIAL SERVICES GROUP, INC. 1.72% 199.38 Delayed Quote.31.55%
Latest news "Economy & Forex"
04:17aBitcoin rises 5.6% to $49,337.72
RE
04:01aChina reports 18 new COVID-19 cases, up from 14 a day earlier
RE
03:26aChina administered total of 392.99 mln COVID-19 vaccines as of May 15
RE
02:48aRoyal Caribbean cancels new cruise line from Israel over unrest
RE
01:36aIndia's pace of daily COVID-19 infections slows as more vaccines awaited
RE
12:20aIndia adds 311,170 daily coronavirus infections to nearly 24.7 mln
RE
05/15Myanmar anti-coup fighters retreat from town as U.S. makes appeal
RE
05/15U.S. fuel crisis eases as pipeline returns to normal after hack
RE
05/15Disney World, U.S. theme parks update mask rules
RE
05/15COMCASTá : Disney World and other U.S. theme parks update mask rules
RE
Latest news "Economy & Forex"