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March Price Statistics

The CPI decreased at an annualized rate of 1.6 percent in March, pulling the 12-month growth rate down to −0.4 percent. Much of the decrease was due to reductions in energy prices, as fuel oil and other types of fuel prices fell 61.6 percent (annualized) and motor fuel prices decreased 42 percent during the month. Many food categories (dairy, meats, cereals, and fruits and vegetables) posted price declines as well.

Excluding food and energy (core CPI), the index rose 2.1 percent in March. The Bureau of Labor Statistics cautions that over 60 percent of the increase in the core CPI was due to a nonannualized 11.0 percent jump (251.4 percent at an annualized rate) in the prices of tobacco and smoking products. Excluding tobacco prices, the core CPI rose just 0.7 percent. The core CPI is up 2.2 percent over the past three months, compared to 1.8 percent over the past year. The measures of underlying inflation produced by the Federal Reserve Bank of Cleveland, the median CPI and the 16 percent trimmed-mean CPI, rose 2.0 percent and 0.4 percent, respectively.

March Price Statistics

    Percent change, last
    1 mo.a 3 mo.a 6 mo.a 12 mo. 5 yr.a 2008 average
Consumer Price Index
  All items −1.6 2.2 −5.4 −0.4 2.6 0.3
  Less food and energy 2.1 2.2 1.2 1.8 2.2 1.8
  Medianb 2.0 2.3 2.0 2.7 2.8 2.9
  16% trimmed meanb 0.4 1.7 1.0 2.3 2.6 2.7
Producer Price Index
  Finished goods −13.1 −0.9 −13.8 −3.6 3.0 0.2
  Less food and energy 0.0 2.6 2.6 3.8 2.5 4.3

a. Annualized.
b. Calculated by the Federal Reserve Bank of Cleveland.
Sources: U.S. Department of Labor and Bureau of Labor Statistics.

Even though the 12-month growth rate in the overall CPI is negative, the core measures are currently trending between 1.8 percent and 2.7 percent. However, it is fairly evident that the inflationary environment has changed dramatically since last July, when the CPI was growing at 5.6 percent and the underlying inflation measures were trending up between 2.5 percent and 3.6 percent.

CPI, Core CPI, and Trimmed-Mean CPI Measures

The underlying price-change distribution in March looks less like that of the last two months and more like that of the fourth quarter of 2008, when the median rose 1.8 percent and the 16 percent trimmed-mean rose just 0.3 percent on average. While some of the similarity is due to energy-price patterns (falling in the fourth quarter and March, rising in January and February), a quick glance at the core CPI price-change distribution (which removes food and energy prices) reveals that the pattern remains intact, even without these components.

In March, the 16 percent trimmed mean excluded most of the larger price increases, as only 12 percent of the consumer market basket rose at rates greater than 5.0 percent. The measure concurrently picked up on some of the downward price momentum, as roughly 32 percent of the index exhibited outright price decreases.

CPI Component Price Change Distribution
Core CPI Component Price Change Distribution

One-year-ahead average inflation expectations jumped up a full percentage point to 3.4 percent in April, perhaps suggesting a lessening in near-term deflation fears. However, April’s jump was likely linked to recent increases in gas prices. In comparison, five-to-ten-year-ahead average inflation expectations ticked down to 2.8 percent from 2.9 percent, sliding further below the average over the past five years of 3.4 percent.

Household Inflation Expectations

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