Personal Finance
Here’s the inflation breakdown for March 2024 — in one chart
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Inflation jumped in March as prices for consumer staples like gasoline edged higher and those for housing remain stubbornly high, suggesting inflation may be a bit stickier than seemed just a few months ago, economists said.
The consumer price index, a key inflation gauge, rose 3.5% in March from a year ago, the U.S. Labor Department reported Wednesday. That’s up from 3.2% in February.
CPI measures how fast prices are changing across the U.S. economy. It measures everything from fruits and vegetables to haircuts, concert tickets and household appliances.
The March inflation reading is down significantly from its 9.1% pandemic-era peak in 2022, which was the highest level since 1981. However, it remains above policymakers’ long-term target around 2%.
Progress in the inflation fight has somewhat flatlined in recent months.
“The disinflation has stalled out,” said Mark Zandi, chief economist at Moody’s Analytics.
“The big rock in the way here is the cost of shelter,” Zandi said.
While housing costs have moderated, they account for the largest share of the CPI inflation index and “are still growing strongly,” he added.
Despite progress having stalled, broader evidence doesn’t suggest a renewed surge in inflation — though it may take longer than expected to bring the rate back to target, economists said. In fact, underlying inflation after stripping out shelter costs is already back to target, Zandi said.
“I still hold to the view that inflation is moderating,” Zandi said. “It’s just taking frustratingly long to get there.”
Household paychecks can buy more stuff, though
Higher oil and gas prices take a toll
Gasoline prices increased 1.7% from February to March, the Bureau of Labor Statistics said. (This figure is adjusted to account for seasonal buying patterns.)
Average U.S. pump prices were $3.52 a gallon on April 1, up from $3.35 on March 4, according weekly data published by the Energy Information Administration.
The increase is largely attributable to higher oil prices. They’ve firmed amid a generally positive outlook for the global economy (meaning greater global oil demand) and controlled output among major oil-producing nations (meaning there hasn’t been a glut of oil), economists said.
Tensions in the Middle East may also be playing a role, Hamrick said.
Higher gas prices may filter through to higher prices elsewhere, since they factor into transportation and distribution costs for goods and even services like food delivery, he said.
Higher energy prices are what worries Zandi most relative to inflation readings. It’s likely the upward trend will continue in coming months, and the dynamic negatively impacts consumer buying power and sentiment, he said.
“Nothing does more damage to the economy more quickly than rising oil and gasoline prices,” he said.
Other ‘notable’ areas of inflation
In addition to shelter, motor vehicle insurance, medical care, recreation and personal care were “notable” contributors to “core” inflation (a reading that strips out volatile energy and food prices), the BLS said.
Shelter, motor vehicle insurance, medical care, apparel and personal care were notable contributors to monthly inflation from February to March, the agency said.
The overall monthly CPI reading, 0.4%, was much higher than the roughly 0.2% that would be expected on a consistently basis to bring inflation back to normal, economists said.
“There is no improvement here; we’re moving in the wrong direction,” Hamrick said.
“The usual trouble spots persist,” said Hamrick, who additionally called out costs for electricity and car maintenance and repairs.
Prices have fallen in some categories
Meanwhile, some consumer categories have seen improvement.
Prices fell for used cars and trucks, new vehicles and airline tickets between February and March, for example. They’re also down over the past year, by 2.2%, 0.1% and 7.1%, respectively, according to CPI data.
Lower prices for new and used cars should lead auto insurance and repair costs to fall as well, economists said.
Grocery prices are another bright spot, they said.
While some categories like eggs and pork chops have seen recent upward movement, the overall “food at home” index stood at 0% on a monthly basis in both February and March.
“Food prices have come to a standstill,” Zandi said. “For most Americans, the thing that bothers them the most about inflation is high food prices.”
Out-of-whack supply and demand
At a high level, supply-and-demand imbalances are what trigger out-of-whack inflation.
For example, the Covid-19 pandemic disrupted supply chains for goods. Americans’ buying patterns also simultaneously shifted away from services — like entertainment and travel — toward physical goods since they stayed at home more, driving up demand and fueling decades-high goods inflation.
Additionally, supply-and-demand dynamics in the labor market pushed wage growth to the highest level in decades, putting upward pressure on prices for services, which are more wage-sensitive.
Now that supply-chain issues are “pretty close to fixed,” there’s “little scope” for goods to contribute to disinflation moving forward, said Sarah House, senior economist at Wells Fargo Economics.
“You need services to take the mantle of disinflation,” because goods have “petered out,” she added.
Housing falls in the services category. It accounts for the largest share of the consumer price index, so disinflation in this category would likely have a large impact on inflation readings.
So far, housing inflation has remained stubbornly high — even as economists have predicted it would start moderating any day given broadly positive trends in prices for new tenant rental leases, for example.
“It seems to be taking a bit longer than people thought,” said Andrew Hunter, deputy chief U.S. economist at Capital Economics.
“It’s coming,” he said. “It’s just a matter of when.”
Jamie Grill | Getty Images
As U.S. markets continue to suffer steep declines in the wake of the Trump administration’s new tariff policies, you may be wondering what the next best move is when it comes to your retirement portfolio and other investments.
Behavioral finance experts warn now is the worst time to make any drastic moves.
“It is dangerous for you — unless you can read what is going to happen next in the political world, in the economic world — to make a decision,” said Meir Statman, a professor of finance at Santa Clara University.
“It is more likely to be driven by emotion and, in this case, emotion that is going to act against you rather than for you,” said Statman, who is author of the book, “A Wealth of Well-Being: A Holistic Approach to Behavioral Finance.”
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That may sound easier said than done when headlines show stocks are sliding into bear market territory while J.P. Morgan is raising the chances of a recession this year to 60% from 40%.
“When the market drops, we have sort of a herd instinct,” said Bradley Klontz, a psychologist, certified financial planner and managing principal of YMW Advisors in Boulder, Colorado. Klontz is also a member of the CNBC FA Council.
That survival instinct to run towards safety and away from danger dates back to humans’ hunter gatherer days, Klontz said. Back then, following those cues was necessary for survival.
But when it comes to investing, those impulses can backfire, he said.
“It’s an internal panic, and we’re just sort of wired to sell at the absolute worst times,” Klontz said.
‘Never trust your instincts when it comes to investing’
When conditions are stressful, our frame of reference narrows to today, tomorrow and what’s going to happen, Klontz said.
It may be tempting to come up with a story for why taking action now makes sense, Klontz said.
“Never trust your instincts when it comes to investing,” said Klontz, particularly when you’re excited or scared.
Meanwhile, many investors are likely in a fight or flight response mode now, said Danielle Labotka, behavioral scientist at Morningstar.
“The problem with that, in acting right away, is that we’re going to be relying on what we call fast thinking,” Labotka said.
Instead, investors would be wise to slow down, she said.
Just as grief requires moving through emotional stages in order to eventually feel good, it’s impossible to jump to a good investing decision, Labotka said.
Good investment decisions take time, she said.
What should be guiding your decisions now
Many investors have experienced market drops before, whether it be during the Covid pandemic, the financial crisis of 2008 or the dot-com bust.
Even though we’ve experienced volatility before, it feels different every time, Labotka said.
That can make it difficult to heed to the advice to stay the course, she said.
Investors would be wise to ask themselves whether their reasons for investing and the goals they’re trying to achieve have changed, experts say.
“Even though the markets have changed, why you’re invested, your values and your goals probably haven’t,” Labotka said. “These are the things that should be guiding your investments.”
While there is the notion that life well-being is based on financial well-being, it helps to take a broader view, Statman said.
At any moment, no one has everything perfect when it comes to their finances, family and health. In life, as in an investment portfolio, all stocks don’t necessarily go up, and it’s helpful to learn to live with the good and the bad, he said.
“Things are never perfect for anyone,” Statman said.
Anchiy | E+ | Getty Images
As the stock market continues to fall, some investors are eager to “buy the dip,” or purchase assets at temporarily lower prices. Financial advisors, however, urge clients to stick with long-term investing plans amid the latest volatility.
U.S. stocks plunged on Thursday after President Donald Trump issued sweeping tariffs on more than 180 countries and territories. The sell-off continued Friday after China unveiled plans to impose a 34% retaliatory tariff on all goods imported from the U.S.
As of Friday afternoon, the Dow Jones Industrial Average was down more than 1,700 points following a 1,679.39 drop on Thursday. Meanwhile, the S&P 500 was off 4.8% after losing 4.84% the previous day. The tech-heavy Nasdaq Composite slid by 4.9% after plummeting 5.97% on Thursday.
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If you’re looking for buying opportunities while assets are down, here are some things to consider, according to financial advisors.
Timing the market is ‘impossible’
When asset values fall, there’s often chatter in online communities like Reddit about whether to “buy the dip.” Typically, investors aim to buy at a discount and expect an eventual recovery, which could lead to future gains.
While buying cheaper investments isn’t a bad idea, the strategy can be tricky to execute since, of course, no one can predict stock market moves, experts say.
“We never recommend timing the market, mostly because it is impossible to do without simply getting lucky,” said certified financial planner Eric Roberge, CEO of Beyond Your Hammock in Boston.
Instead, you should “stick to a thoughtful, rules-based investment strategy designed to get you through to your long-term goals,” he said.
Keep a ‘disciplined approach’
When buying assets during a market downturn, you need a “disciplined approach,” according to CFP Jay Spector, co-chief executive officer of EverVest Financial in Scottsdale, Arizona.
For example, some investors linger in cash while waiting for rock-bottom prices. But no one can predict the bottom of the market, experts say.
Waiting on the sidelines can be costly because the best returns can follow the biggest dips, according to research from Bank of America.
Rather than trying to time the bottom, you should consider “dollar-cost averaging,” which systematically invests your money at set intervals, Spector said. The strategy can capture lower prices while reducing risk, he said.
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