- A new Labor Department report shows U.S. inflation spiked to 3.3% in March.
- The increase, driven primarily by fuel costs, is largely due to fallout from the Iran war.
- March core inflation came in at a more moderate 2.6%.
U.S. inflation saw its largest monthly increase in almost four years in March as the rate of price increases for goods and services over the past 12 months shot up to 3.3%, according to a Friday report from the Labor Department.
March’s annual rate, up from February’s 2.4%, was mostly driven by soaring energy costs as global petroleum markets were disrupted by fallout from the Iran war last month, including the closure of the Strait of Hormuz, a critical shipping lane that connects oil-producing Persian Gulf nations to the rest of the world.
According to Friday’s Consumer Price Index report from the Bureau of Labor Statistics, overall energy costs were up 12.5% from the same time a year ago. Gasoline prices across the country increased by a whopping 21.2% on a monthly basis and are up 18.9% over the past 12 months. Gas price increases accounted for almost three-quarters of March’s inflation rate jump, according to the report.
The average price for a gallon of regular across the country on Friday was $4.15, according to AAA tracking, up from $3.54 a month ago. Utah drivers are paying even more for fill-ups with the statewide average at $4.24 on Friday, compared to $3.40 per gallon this time last month.
Core inflation, which strips out volatile food and energy prices, was a more moderate 2.6% in March, up 0.1% from February’s 2.5% annual reading.
The cost of groceries moved up by 1.9% on an annual basis in March, shelter-related costs were 3% higher than a year ago and medical care services were 3.7% more expensive than this time last year, per Friday’s report.
Mountain West states, which include Utah, saw regional annual inflation rate in March tracking just below the national average at 3.1%.
Broader price increases could be on the horizon
Mike Reid, the head of U.S. economics at RBC, noted that while energy prices were the main driver of March’s inflation spike, more wide-ranging price impacts could be on the horizon.
“For consumers, this is very real,” Reid told Politico. He said that while March’s inflation surge was largely due to energy prices, which can be volatile, the outlook now depends on how long the “conflict in the Middle East lasts, and what is the risk that higher energy prices start to spill over into the broader economy.”
While gas prices may be the most clear evidence of impacts the Iran war is having on family budgets, higher energy costs come back to hit consumer pocketbooks in numerous other ways.
Diesel fuel, which powers the trucks and other vehicles that transport raw materials, consumer goods, agricultural products and much more, is much more expensive than before the conflict began. The average price for a gallon of diesel across the U.S. was $5.68 on Friday, according to AAA, up from $4.78 per gallon a month ago.
Disparate economic signals
The latest federal inflation data follows last week’s jobs report that found hiring far outpaced earlier projections.
Last Friday’s Employment Situation Summary, assembled by the Bureau of Labor Statistics, showed U.S. employers added 178,000 positions in March and the nation’s unemployment rate moved down a tenth of a percent to 4.3%. Most economists were expecting unemployment to hold steady at 4.4% last month and the job creation volume to come in around 59,000 positions.
Health care employment was the primary driver of the March jobs growth with the sector adding 76,000 positions for the month. The construction industry added 26,000 new jobs and transportation/warehousing businesses grew their employment rolls by 21,000.