CPI, Latest Release, March 2024
For the third consecutive month, CPI figures were higher than expected, with headline CPI rising 3.5% year-over-year and 0.4% month-over-month (compared to consensus forecasts of 3.4% and 0.3%); and Core CPI up 3.8% and 0.4% (with forecasted rates of 3.7% and 0.3%). On a monthly basis, these were the same percentage increases as February. Headline CPI was driven by higher energy prices, particularly gasoline, up 1.7%. On the Core side, prices for car insurance and car maintenance and repair experienced the highest rate of increases over the month, 2.6% and 1.7%, respectively.
CPI for Housing, March 2024
The CPI includes two measures for shelter costs: owners’ equivalent rent (OER) and rent of primary residence, both of which are self-reported. Together, they comprise about one-third of CPI. Both measures for housing continued to decelerate, albeit at a much slower pace. Rent increased 5.7% year-over-year, inching down from 5.8% in February, while OER fell below 6.0% for the first time since July 2022. Monthly increases stagnated at 0.4%.
The New Tenant Rent Index, which measures prices renters would face if they changed housing units every period, will be released in the coming days by the Bureau of Labor Statistics. The Q4 23 data showed a 4.6% year-over-year decline in rents for new leases and an 8.8% decline over the quarter.
Super Core Inflation, March 2024
Due mainly to lags in CPI shelter data, the Fed has begun to focus more on “super core” inflation, that is, prices excluding food, energy and shelter. Super core inflation rose 2.4% year-on-year, the highest since last July. Monthly increases were unchanged at 0.3%. Outside of the core inflation categories mentioned above, super core inflation was driven by apparel prices, up 0.7%, and medical services, which experienced a 0.6% increase in March.
Inflation Expectations, March 2024
The Fed tracks 21 different measures of inflation expectations. The data presented in the chart below are inflation expectations one year from now from the Federal Reserve Bank of New York’s Survey of Consumer Expectations and the University of Michigan’s Consumer Sentiment Index. The Fed’s measure has remained unchanged for four consecutive months at 3.0%. Expectations for price increases for all goods increased this month, as did expected prices for medical care, rent and college tuition. The University of Michigan measure edged down to 2.9%, which is within the 2.3%-3.0% range seen in 2018 and 2019.
Wage Growth, March 2024
Wage growth, as measured by average hourly earnings, increased 4.1% year-over-year, its lowest rate since June 2021. Wages for the financial activities sector, which includes the apartment industry, continued to outpace the national average, rising 5.8% year-over-year. Only the durable goods manufacturing sector and the transportation/warehousing sector had higher rates of increases at 6.0% and 6.1%, respectively.
What to Watch in the Next Month
This month’s inflation report will have little impact on the Fed’s decisions on when and by how much to cut rates. Recent speeches and interviews given by Fed officials have been open about the fact that fewer, and smaller, rate cuts are likely this year given the strength of the economy and stickiness of inflation. Some have even suggested there may be no rate cuts, but that is currently not the consensus.
Next Tracker: May 15, 2024