Because of the Russia-Ukraine crisis, inflation was intensifying globally. Nations like America, the United Kingdom, Japan and several more had to suffer the crisis of inflation. According to the new CNBC report, American consumers have already started to cut back on their spending. Even the higher–income consumers have started to cut down their luxurious expenses because of this extreme thriving inflation.
The inflation problem was supposed to bury itself by the end of March but it certainly didn’t happen. Prices kept rising marking a 40-year new high this march, data from the Bureau of Labour Statistics pointed out. For the year ending in March, the Consumer Price Index increased by 8.5%, unadjusted for seasonal variations. That was higher than February’s elevated reading of 7.9%, and it was the highest level since December 1981, when the Consumer Price Index was 8.9%. The March statistic released on Tuesday was slightly higher than the 8.4% projected by analysts.
The majority of the rise in March was due to an increase in fuel and food prices, which surged as the Ukraine war threw global commodity markets into a loop, as well as an increase in housing expenses. Just last month, the price of gasoline surged by 18%.
When the more volatile food and energy categories were excluded, prices jumped 6.5% in the 12-month period ending in March, the largest increase since August 1982, when the more volatile food and energy categories were excluded. Over the previous year, energy expenses have increased by 32%, while food expenditures have increased by 8.8%. It was the most significant rise in food prices since May 1981.
Despite the fact that these more volatile products played such a large role in last month’s price increases, Tuesday’s figures suggest that inflationary pressures are widespread across the economy, according to Joe Brusuelas, the chief economist at RSM US. “Yes, inflation may soon reach a nadir. That does not, however, suggest that major relief is on the way in the near future “he stated.
“Price shocks continue to cascade through the US economy. The risk of further oil and energy shocks given the war in Eastern Europe and the possibility that the European Union may choose to cut off natural gas and oil imports from Russia … would significantly roil global oil prices,” Brusuelas mentioned in his note to clients.
With seasonal adjustments, consumer prices jumped 1.2% in March, the largest increase since September 2005. Prices grew 0.3% excluding food and energy, which is less than in February, highlighting how important commodity prices are in the current inflation rise. Airline tickets, furnishings, medical treatment, and auto insurance have all gone up in price.
In emailed remarks, Brian Coulton, chief economist at rating firm Fitch, said, “The good news here is that core inflation declined on a month-over-month basis.” He noted that reducing automobile prices are to blame for the majority of the reduction.
Despite their dissatisfaction with their financial positions and cuts, consumers continue to spend freely. There are currently many jobs available, unemployment is low, debt burdens are low, asset prices are high, and there is a large amount of excess savings. Even though consumers are cutting back and spending less on some products, the mood has not yet taken hold of spending motivation to the point where it is causing more than a delay in economic development. “I believe that, regardless of their attitude, the American consumer will continue to spend as long as the employment market is healthy,” Mark Zandi, chief economist at Moody’s notes added.
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