U.S. consumer prices rose sharply in March as the economic recovery gained momentum, marking the start of an expected monthslong pickup in inflation pressures. Some of the price increases reflected temporary factors, but others showed how demand for many goods and services is reviving a year after the coronavirus pandemic shut down large swaths of the economy, analysts said.
The Labor Department reported Tuesday that its consumer-price index—which measures what consumers pay for everyday items including groceries, clothing, recreational activities and vehicles—jumped 2.6% in the year ended March, the biggest 12-month increase since August 2018, and rose a seasonally adjusted 0.6% in March from February. Nearly half the monthly increase was due to a 9.1% jump in gasoline prices, which have climbed partly due to production problems following severe winter storms, economists said.
Services prices, excluding energy, rose 0.4% in March from February, the fastest monthly pace since July 2020, as the country’s recovery from the initial Covid-19 impact took off. Prices for hotels, car rentals, airfare and admission to sporting events were all up in March.
Economists widely expect consumer prices to keep climbing in the months ahead after nearly a year of muted overall inflation as the Covid-19 pandemic damped consumer spending. Whether this rise proves transitory is one of the key questions for markets and the U.S. recovery over the next year or so, as the Biden administration, Congress and the Federal Reserve continue to provide financial support for the economy.
Fed officials expect inflation to rise temporarily this year because of growing demand fueled by increased vaccination rates, decreasing restrictions on businesses, trillions of dollars in federal pandemic-relief programs and ample consumer savings.