The March Consumer Price Index (CPI) report came in hotter than expected, with core CPI rising 3.8% month over month compared to the 3.7% analysts had forecasted. The inflation print has put stock futures under pressure ahead of Wednesday's market open.
Yahoo Finance's Dani Romero, Madison Mills, and Brooke DiPalma break down the inflationary trends across different key sectors — food, energy, and shelter costs.
On the food front, inflation saw a moderate 0.1% uptick in March, coming in line with annual forecasts by rising 2.2% year over year.
The energy sector continues to grapple with elevated inflation, posting a 1.1% month-over-month increase. However, the pace of energy price growth has slowed, with the inflation rate falling from the previous month's 2.3% rise. Shelter and gasoline costs together accounted for over half of the overall CPI's monthly gain.
Shelter inflation is starting to show signs of easing, with the year-over-year reading dropping to 5.7% from the March 2023 high of 8.2%. Still, shelter inflation was responsible for 60% of March's total monthly increase, driven primarily by rising rents and owners' equivalent rent.
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Editor's note: This article was written by Angel Smith
Video Transcript
- Futures lower after CPI, Consumer Price Index, for the month of March came in hotter than expected that core rising 3.8% versus 3.7% that was expected here. We're taking a deeper dive into three sectors in particular that have been hit by sticky inflation food, energy, and shelter. We've got team coverage to break it all down. I told you, the newsroom was a stir. Well, here we've got some of the reporters. We're breaking things down on the sector basis. Yahoo Finance's Brooke DiPalma, Madison Mills, and Dani Romero. Standing by Brooke, let's start with you. You're watching food as consumers continue to grapple with high grocery prices.
BROOKE DIPALMA: Yeah, good morning, Brad. Certainly yet another month where we saw overall food inflation see an uptick month-over-month up 0.1%. Now that is compared to flat in the previous month and year-over-year continues, to see a deceleration, but not a decrease here, year-over-year up 2.2%. And then when you take a closer look at food away from home, that's what's really driving this higher food inflation. Think of dining out at restaurants, at bars.
That was up 0.3% month over month, and the cost of groceries were unchanged. But some of the items that we are tracking in particular includes the cost of eggs. We did see a jump month-over-month of 4.6%, and that's largely because of the impact of certain bird flu cases popping up at some of the largest egg producers here in the US, including Cal-Maine eggs. Sugar and sweets also something we've been tracking. The price of cocoa has seen a major uptick recently that did tick down last month.
Beef and veal, up slightly. We are seeing lower cattle supply. Many experts telling me that is sticking around. Other items that did see a jump in price include frankfurters, chicken, lettuce, and roasted coffee last month, and we'll continue to keep a closer eye on how those play out later on this month. Maddie, I know you're watching energy where we saw prices ease earlier in the winter. What did we see from this report?
MADISON MILLS: Yeah, we're still seeing those energy prices rising here. But they are rising at a slower pace here. So if we take a look at these numbers, month over month, we saw a 1.1% increase in energy. That is down from the 2.3% increase we saw in the prior month. That brings the overall energy index up to 2.1% growth year-over-year here now. I want to point out that this was a beat when it comes to what we were expecting from the energy sector. But we are seeing a broad minimal beat across a lot of the different sectors when it comes to the overall consumer price index print here.
So when you look at that overall broadening, it does indicate bad news for the Fed because they're seeing a lot of areas with price increases, not just one specific area. Having said that, the Fed does strip out shelter and energy. When it comes to that super core number, that is hitting 4.8%. That is not what the Federal Reserve wants to see. Shelter and gas contributing over half to the overall monthly increase when it comes to this CPI print. Again, this is not a massive beat in energy. But the general hot headline does indicate a broadening of that inflation. Dani, I know that you are watching shelter, which is contributing a little over 1/3 to the CPI print. What do you have?
DANI ROMERO: Maddie, shelter costs remain sticky. But the results show that it's slowly easing. On a yearly basis, shelter came in at 5.7%. That's lower than last year in March where shelter inflation peaked at 8.2%. And now on a monthly basis, shelter posted a 0.4% gain. Shelter costs accounted for 60% of March's overall monthly gain in all things minus food and energy. But there are two components that hold the biggest weight in this shelter figure. That's owner's equivalent rent, OER. That's the hypothetical rent that you would earn if you rented out your property. OER landed at 0.4% a monthly gain, and the second component is rent, which lags real-time rent data, and that reached 0.4% monthly increase.
Now current rent data does show that rent prices are increasing month over month, but still down annually. So is this increase in rent prices somewhat concerning? Some economists say no because the Fed wants to see real time rent data move toward that 2% inflation goal. Bottom line, the housing market is still recovering, and the tight supply is still pushing people to stay in that rental market. Some Wall Street economists expect shelter to bottom out by spring or July of next year. Seana, back to you.
SEANA SMITH: All right, Dani thanks so much. We're going to take a look at the reaction that we're seeing play out in the markets right now because the futures market really on the move on the heels of this hotter-than-expected print, the third-hotter-than expected print that we've gotten for CPI here in a row. So you can see the huge move to the downside for the Dow Futures right after that report was released now on track to open the day off just about 400 points. When you take a look at the S&P futures that also moving to the downside the dip at the same time, now on track to open off just about 1%, over 1%.
The same is the case for NASDAQ futures we also want to take a look at the activity of what we are seeing play out in the bond market because you can see when you take a look at the 10-year prices, at least moving to the downside, which means yields rates actually surging on the heels of this print. The same goes for the two-year as well. You can see that downward move for the two-year. In terms of prices, that means rates obviously surging there. When you take a look at gold, we've been talking so much about gold right now, the pricing action that we have seen over the last several weeks in the lead up to this print here.
We had seen a bit of a move to the upside or huge move, I should say, to the upside at record highs. Heading into this print, you are now seeing a bit of a move to the downside. We had briefly dropped right after the report was released, but right not too far from the flat line at this point and taking a look at a longer-term chart. When it comes to gold, you can obviously see the fact that we're not moving in a bit of a reversal, a bit of a downward move here for gold futures at least now stemming or at least halting some of that upward momentum that we have steadily seen in this chart here over the last two months.
And then real quick, I want to take a look at the price of Bitcoin, because it's always interesting check in on the price of Bitcoin, especially on the heels of a move like this that we are seeing in the futures market. You could see that dip right there on your screen right after the release-- right after the CPI print was released. And you can now see the pressure of it off, just about 4% right now, just below 68,000.