Living in the U.S. Got Cheaper in March According to the Consumer Price Index

Andrew Klips  |

For the first time since December, the cost of living in the United States decreased in March, according to the latest Consumer Price Index report from the Labor Department on Tuesday. A 4.4 percent drop in the cost of gasoline prices was largely responsible for the decline.

The Bureau of Labor Statistics said that the  in March, compared to February. In February, the CPI surged 0.7 percent, mostly because of a 9.1 percent spike in gas prices leading to a 5.4 percent increase in the energy index. In the 12 months to March, the CPI increased a non-seasonally adjusted 1.5 percent, well within the inflation targets of the Federal Reserve. It also provides chatter that the central bank will continue with its monetary easing policies.

The 1.5 percent increase in overall CPI was the smallest year-over-year increase since last July.

For the month, the energy index fell 2.6 percent as the indexes for electricity and fuel oil were also lower. The food index was flat for March.

So-called “core” CPI, which doesn’t include the volatile energy or food sectors, increased only 0.1 percent, following a 0.2 percent rise in February. Declines in apparel, household furnishings and operations and tobacco were offset by increases in helter, used cars and trucks, medical care, personal care and airline fares.

Economists were expecting a flat month for the overall CPI and a 0.2 percent rise in core CPI.

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With crude oil prices plunging so far in April, it should be expected at this point that gas prices will stay on the decline in April, although that’s a bit contrarian to prices generally rising into the summer driving months.

Although there was some discussion in the latest minutes from the March meeting of the Federal Reserve about possibly putting an end to quantitative easing practices because of potential negative long-term impact, the latest benign reading on inflation will derail that argument. Low inflation gives consumers more money to spend and helps spur the economy along.

In a separate report from the Commerce Department on Tuesday, the housing market continued to show its on the road to recovery. The report showed that housing starts in March surged to a 1.036 million seasonally adjusted rate, the fastest clip of breaking ground for new homes since June 2008 and up 7 percent from February.

The increase was given a jolt by the volatile apartment segment, with increased by 31.1 percent to a seasonally adjusted rate of 392,000. It was the highest level since January 2006.

On the flip side, applications for new permits, a gauge of future demand, slipped mildly to an annual rate of 902,000 in March from February’s 939,000 rate.

The markets are responding favorably to the economic data after nosediving on Monday because of less-than-expected GDP data from China. Less than one hour into the day, the Dow Jones Industrial Average is ahead by 107 points, the S&P 500 is up 13 points and the Nasdaq has advanced 25 points.

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