In March, inflation in the United States started to slow down. In September 2023, inflation hit an annual rate of just 2.4%, the lowest rate it has been in six months. Now businesses and consumers alike are grappling with the highest net increase in tariff rates in more than a century. This drop is especially painful given how critical this moment in time is. The newest Consumer Price Index (CPI) data paint a complicated economic picture. Even as inflation overall heads in the downward direction, food prices continue to climb.
Also, the CPI egg index had a very big increase, up 5.9% from February. Plugging in those numbers produced an equally shocking year-over-year increase of 60.4%. This spike is a direct result of the continued turmoil in the agricultural industry, especially stemming from the avian flu. Retail prices have remained high even as wholesale egg prices are beginning to fall, something the U.S. Department of Agriculture recently noted. This promising trend has not filtered down to the retail level yet, however.
March’s CPI results are finally starting to reflect a major core CPI decline. It has now hit a 38-year low if you strip out volatile food and energy prices. It was up only 0.1% for the month leading to a 12-month rate of 2.8%. Economists predicted the drop in energy prices to have a large downward pull on the all-item CPI. They forecast a 0.1% decline for the month and a 2.6% increase for the year, based on FactSet. The better measure for what the public experiences, the overall CPI index, decreased due to falling energy prices. This large decline was chiefly due to seasonal adjustments and fears of growth and recession.
Food prices were already going up too, increasing 0.5% since February, when they were the same as the previous year. The overall inflation slowdown is indicative of a resilient economy, even as President Trump prepares to implement aggressive trade measures that may further complicate these economic trends. This is the largest monthly price drop since May of 2020.
As markets and consumers continue to adjust to the changing tariff environment, it remains clouded by questions about future inflationary impacts. The growing effects of rising tariffs and increasing commodity pricing have made it a challenging time to predict the future economy across multiple sectors.
“The decline in core inflation in March will definitely be welcomed by the Fed, particularly as it was evident in both core goods and services components.” – Brian Coulton, chief economist at Fitch Ratings.
As markets and consumers adapt to the evolving tariff landscape, uncertainty looms over future inflationary pressures. The interplay between rising tariffs and fluctuating prices continues to shape economic expectations across various sectors.