Inflation Expectations Build

 

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Rising energy and food prices pushed the Consumer Price Index higher in March—extending the run to nine consecutive months of growth. Consumer Price Index for All Urban Consumers rose 0.5 percent in March, with the year-over-year increase at 2.7 percent.

Energy and food prices continue to be the main driver of the CPI growth, with the energy index up 3.5 percent and the food index up 0.8 percent in March.  Together they accounted for three quarters of the growth in the all items index.

The gasoline index continued to rise strongly, up 5.6 percent in March and 14.4 percent for the first quarter of 2011. Fuel oil also contributed to the rise in the energy index, up 6.2 percent in March and a total of 37.2 percent for the past six months.

With the recent energy driven gains, the CPI for All Urban Consumers is up 1.3 percent in the first quarter of 2011—an annualized rate of 5.2 percent—and consumers are becoming increasingly concerned about high inflation in the year ahead. 

Energy prices appear to be nearing their peak, with future markets indicating energy prices will peak in the next few months, although they are likely to remain high through the second half of 2011 and 2012. Expect the all items index to settle back to moderate growth over the remainder of 2011, with an overall gain of 2.6 percent for the year. Inflation will remain moderate through 2012, with an annual rate of growth of 1.5 percent.

– Courtesy of NAHB