-Travel Restrictions Slash Prices for Hotels, Airline Fares
-Consumer Inflation Remains Tame, Food Prices Up on Grocery Shopping
By Kevin Kastner
WASHINGTON (MaceNews) – Consumer prices fell more than expected in March, with a plunge in energy prices the main factor due to falling oil prices and a reduced demand for gasoline due to telecommuting and social distancing.
There were also sharp declines for lodging away from home and airline fares, both victims of travel restrictions resulting from the COVID-19 crisis.
In the report released on Friday, overall CPI fell 0.4%, a larger drop than the 0.3% decline expected. Core CPI, excluding both food and energy prices, fell 0.1% in the month, below the 0.1% gain expected.
The Bureau of Labor Statistics said there were some issues with price collection this month due to the COVID-19 business shutdowns and there were some series that were not able to be published this month as a result.
Energy prices plunged by 5.8%, with gasoline prices down 10.5%. Seasonal adjustment factors expect demand for gasoline to rise in March as the weather turns warmer, lifting prices. However, unadjusted energy prices fell by 4.2% in March, with unadjusted gasoline prices down 7.4%.
No seasonal factor could have anticipated a scenario where a vast majority of US drivers would remain at home for Spring Break and leave their vehicles parked virtually around the clock. Expect more of the same in the coming months, even as oil-producing countries agreed this week to trim output to try to prop up barrel prices.
Food prices rose 0.3% in the month, with food at home prices up 0.5% and food away from home rose 0.2%. The demand for people to stay at home and away from restaurants had the effect of a run on the grocery stores in early and mid-March, lifting prices of fruits and vegetables and dairy items. Separately, prices of household cleaning supplies rose by 1.1%
Within the core, the relatively large owners’ equivalent rent category rose by 0.3% but lodging away from home prices fell by 6.8% due to the sharp drop-off in traveling in the month that left hotels and motels vacant. Airline fares fell by 12.6%.
There were also notable declines for apparel and new vehicle prices, again due to reduced spending. Medical care services prices rose 0.5%, while medical care commodities prices were flat.
Through March, overall CPI prices were 1.5% above their year ago level, much slower than the 2.3% rate in February. Prices excluding food and energy were up 2.1% year/year, down from 2.4% in the previous month. The impact of business closures and widespread layoffs on consumer demand should continue to keep downward pressure on prices until activity begins to rebound.
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Contact this reporter: kevin@macenews.com