AP

Sticker shock: March inflation likely set new 40-year high

Apr 11, 2022, 9:01 PM | Updated: 9:39 pm

WASHINGTON (AP) — With ever-rising costs for food, gasoline, housing and other necessities squeezing consumers and threatening the economy, inflation in the United States likely set yet another four-decade high in March.

The government’s consumer price index being released Tuesday is expected to show that prices shot up 8.4% from 12 months earlier, according to economists surveyed by the data firm FactSet. That would mark the fastest year-over-year inflation since December 1981. And it would surpass the 7.9% 12-month increase in February, which itself set a 40-year high.

Economists have also forecast that from February to March, consumer prices jumped 1.1%. That would be the sharpest month-to-month jump since 2005.

The March numbers will be the first the capture the full surge in gasoline prices that followed Russia’s invasion of Ukraine on Feb. 24. Moscow’s brutal attacks have triggered far-reaching Western sanctions against the Russian economy and have disrupted global food and energy markets. According to AAA, the average price of a gallon of gasoline — $4.11 — is up 44% from a year ago, though it has fallen back in the past couple of weeks.

The escalation of energy prices has led to higher transportation costs for the shipment of goods and components across the economy, which, in turn, has contributed to higher prices for consumers.

“The war in Ukraine has complicated the inflation outlook,” noted Luke Tilley, chief economist at Wilmington Trust.

Economists point out that since the economy emerged from the depths of the pandemic, consumers have been gradually broadening their spending beyond goods to include more services. A result is that high inflation, which at first had reflected mainly a shortage of goods — from cars and furniture to electronics and sports equipment — has been gradually emerging in services, too, like travel, health care and entertainment.

If the March price figures come in as expected, they will solidify expectations that the Federal Reserve will raise rates aggressively in the coming months to try to slow borrowing and spending and tame high inflation. The financial markets, in fact, now foresee much steeper rate hikes this year than Fed officials had signaled as recently as last month.

The central bank’s rate increases will make loans sharply more expensive for consumers and businesses. Mortgage rates, in particular, though not directly influenced by the Fed, have rocketed higher in recent weeks, making home buying more expensive. Many economists say they worry that the Fed has waited too long to begin raising rates and might end up acting so aggressively as to trigger a recession.

For now, the economy as a whole remains solid, with unemployment near 50-year lows and job openings near record highs. Still, rocketing inflation, with its impact on Americans’ daily lives, is posing a political threat to President Joe Biden and his Democratic allies as they seek to keep control of Congress in November’s midterm elections.

Economists generally express doubt that even the sharp rate hikes that are expected from the Fed will manage to reduce inflation anywhere near the central bank’s 2% annual target by the end of this year. Tilley, Wilmington Trust economist, said he expects year-over-year consumer inflation to still be 4.5% by the end of 2020. Before Russia’s invasion of Ukraine, he had forecast a much lower 3% rate.

In Tuesday’s government report, even excluding volatile food and energy prices, so-called core inflation for the past 12 months is expected to have hit 6.6%, according to the FactSet survey. That would be the biggest such year-over-year jump since August 1982.

Inflation, which had been largely under control for four decades, began to accelerate last spring as the U.S. and global economies rebounded with unexpected speed and strength from the brief but devastating coronavirus recession that began in the spring of 2020.

The recovery, fueled by huge infusions of government spending and super-low interest rates, caught businesses by surprise, forcing them to scramble to meet surging customer demand. Factories, ports and freight yards struggled to keep up, leading to chronic shipping delays and price spikes.

Critics also blame, in part, the Biden administration’s $1.9 trillion March 2021 stimulus program, which included $1,400 relief checks for most households, for helping overheat an already sizzling economy.

Many Americans have been receiving pay increases, but the pace of inflation has more than wiped out those gains for most people. In February, after accounting for inflation, average hourly wages fell 2.5% from a year earlier. It was the 11th straight monthly drop in inflation-adjusted wages.

Copyright © The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

AP

Lead water pipes pulled from underneath the street are seen in Newark, N.J., Oct. 21, 2021. (AP Pho...

Associated Press

Biden to require cities to replace harmful lead pipes within 10 years

The Biden administration has previously said it wants all of the nation's roughly 9 million lead pipes to be removed, and rapidly.

1 day ago

Facebook's Meta logo sign is seen at the company headquarters in Menlo Park, Calif., on, Oct. 28, 2...

Associated Press

Meta shuts down thousands of fake Facebook accounts that were primed to polarize voters ahead of 2024

Meta said it removed 4789 Facebook accounts in China that targeted the United States before next year’s election.

2 days ago

A demonstrator in Tel Aviv holds a sign calling for a cease-fire in the Hamas-Israel war on Nov. 21...

Associated Press

Hamas releases a third group of hostages as part of truce, and says it will seek to extend the deal

The fragile cease-fire between Israel and Hamas was back on track Sunday as the first American was released under a four-day truce.

6 days ago

Men look over the site of a deadly explosion at Al-Ahli Hospital in Gaza City, Wednesday, Oct. 18, ...

Associated Press

New AP analysis of last month’s deadly Gaza hospital explosion rules out widely cited video

The Associated Press is publishing an updated visual analysis of the deadly Oct. 17 explosion at Gaza's Al-Ahli Hospital.

9 days ago

Peggy Simpson holds a photograph of law enforcement carrying Lee Harvey Oswald's gun through a hall...

Associated Press

JFK assassination remembered 60 years later by surviving witnesses to history, including AP reporter

Peggy Simpson is among the last surviving witnesses who are sharing their stories as the nation marks the 60th anniversary.

10 days ago

Israeli Prime Minister Benjamin Netanyahu, chairs the weekly cabinet meeting in Jerusalem, Sunday, ...

Associated Press

Israeli Cabinet approves cease-fire with Hamas; deal includes release of 50 hostages

Israel’s Cabinet on Wednesday approved a cease-fire deal with the Hamas militant group that would bring a temporary halt to a devastating war.

10 days ago

Sponsored Articles

(KTAR News Graphic)...

KTAR launches online holiday auction benefitting Boys & Girls Clubs of the Valley

KTAR is teaming up with The Boys & Girls Clubs of the Valley for a holiday auction benefitting thousands of Valley kids.

Follow @KTAR923...

The best ways to honor our heroes on Veterans Day and give back to the community

Veterans Day is fast approaching and there's no better way to support our veterans than to donate to the Military Assistance Mission.

...

DAY & NIGHT AIR CONDITIONING, HEATING AND PLUMBING

Importance of AC maintenance after Arizona’s excruciating heat wave

An air conditioning unit in Phoenix is vital to living a comfortable life inside, away from triple-digit heat.

Sticker shock: March inflation likely set new 40-year high