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Behind the Numbers: PCE Inflation Update, March 2022

This update, prepared by Dallas Fed Senior Economist Jim Dolmas, provides an in-depth analysis of the latest personal consumption expenditures (PCE) inflation data. NOTE: Terms in bold are defined in the Inflation Update Glossary.

The headline, or all-items, PCE price index rose an annualized 10.9 percent in March after increasing an annualized 6.4 percent in February. The price index for PCE excluding food and energy rose at a 3.6 percent annualized rate after increasing an annualized 3.5 percent a month earlier. Prices for food and energy rose sharply.

The Dallas Fed’s Trimmed Mean PCE inflation rate was an annualized 3.1 percent in March, compared with a 4.0 percent rate in February.

Over the six months ending in March, the trimmed mean averaged an annualized 4.4 percent rate of increase. Over the same period, the headline and core indexes averaged annualized rates of 7.5 percent and 5.1 percent, respectively.

The 12-month trimmed mean inflation rate was 3.7 percent in March, up from 3.6 percent in February. The 12-month inflation rate for headline PCE was 6.6 percent, up from 6.3 percent in February, while the 12-month inflation rate for PCE excluding food and energy was 5.2 percent, versus 5.3 percent a month earlier.

Gasoline Prices Surge

The price index for gasoline and other motor fuel rose a seasonally adjusted 18.3 percent in March after rising 6.7 percent in February. In data that go back to 1959, there are only two months with bigger jumps in the motor fuel price index than March’s 18.3 percent. Prices for the other major energy components also rose, with the price indexes for fuel oil, electricity and natural gas up 22.3 percent, 2.2 percent and 0.6 percent, respectively. The price index for energy goods and services as a whole rose 11.8 percent in March after rising 3.7 percent in February.

The price index for gasoline was up 48.4 percent for the 12 months ending in March; it had been up 36.9 percent for the 12 months ending in February. Compared with March 2021, the price index for fuel oil was up 70.1 percent, while the price indexes for electricity and natural gas were up 11.1 percent and 21.4 percent, respectively. The price index for energy goods and services as a whole was up 33.9 percent over the 12 months.

After March’s surge, the price index for gasoline is likely to show a decline when PCE data for April are released. Weekly retail price data from the Department of Energy (DOE) show gasoline prices posting a roughly 2.5 percent decrease in April before seasonal adjustment. The typical seasonal pattern for April—what we would expect given normal changes in supply-and-demand conditions—amounts to a roughly 5.5 percent price increase, making the DOE data consistent with an 8.0 percent decrease in the seasonally adjusted gasoline price index. A decrease of that magnitude would subtract about 2.3 annualized percentage points off April’s headline inflation rate.

Food Prices Up Sharply Again

The price index for food and beverages purchased for off-premises consumption rose at a 17.7 percent annualized rate in March after increasing at an 18.6 percent rate in February. The increase in the aggregate reflects large increases in the prices of both less-processed food items (up an annualized 15.2 percent) and more-processed food items (up an annualized 18.7 percent).

The price index for food as a whole was up 9.2 percent over the 12 months ending in March. The 12-month increase in the aggregate reflects a 12.6 percent rise in the prices of less-processed items and an 8.0 percent increase in the prices of more-processed items.

Core Goods, Services Prices Climb

Prices for core goods rose an annualized 1.1 percent in March after increasing an annualized 4.2 percent in February.

Among core goods, the price index for used light trucks (down an annualized 35.5 percent) had the largest negative impact, subtracting about 0.5 annualized percentage points from March’s core rate. At the other end of the spectrum, the price index for jewelry (up an annualized 68.2 percent) had the largest positive impact, contributing about 0.4 annualized percentage points to March’s core rate.

For the 12 months ending in March, prices for core goods were up 7.5 percent, compared with a 7.6 percent increase for the 12 months ending in February.

Prices for core services, meanwhile, rose an annualized 4.5 percent in March after increasing an annualized 3.2 percent in February. Among components experiencing outsized changes, the price index for financial service charges, fees and commissions (down an annualized 9.3 percent) had the biggest negative impact on ex-food-and-energy inflation, subtracting around 0.3 annualized percentage points from March’s core rate. The price index for air transportation (up an annualized 170.5 percent) had the largest positive impact, contributing about 0.8 annualized percentage points to March’s core rate.

Our “big three” price index—aggregating three of the largest and least-volatile components of core services: rent, owners’ equivalent rent (OER) and the price of dining out—rose at a 4.7 percent annualized rate in March, compared with a 5.8 percent rate in February. Individually, the annualized increases were 5.3 percent for rent, 5.3 percent for OER and 2.9 percent for dining out (more formally, “other purchased meals”). The 2.9 percent annualized increase in the price index for dining out was the smallest one-month gain for that series since March 2020.

For the 12 months through March, the big three index was up 5.3 percent, compared with a 5.1 percent increase for the 12 months through February. The price index for core services as a whole rose 4.3 percent for the 12 months ending in March, compared with a 4.4 percent increase for the 12 months through February.