Higher food, rent costs boost U.S. consumer inflation

BY Sarah Corapi  April 15, 2014 at 6:38 PM EST

Photo by Flickr user khrawlings

Photo by Flickr user khrawlings


Consumer prices in the U.S. ticked upward this March, climbing more than expected as Americans paid slightly more for food and rental housing. The hike suggests improving consumer demand, and may alleviate concerns among some Federal Reserve officials over too-low inflation.

The consumer price index — which essentially measures how much Americans pay for goods and services — rose by 0.2 percent last month, after a 0.1 percent increase in February. Last year, the index rose by 1.1 percent in February. It then surged even higher by 1.5 percent over the past 12 months.

While the numbers signal that U.S. demand is on the upswing, not all prices are on the rise. Gasoline costs fell by 1.7 percent in March, and interest rates are likely to remain low for the time being, Reuters reports.

Are the rising prices really a good thing for the U.S. economy? The Federal Reserve seems to think so. Bringing the U.S. economy out of an inflation slump has been a top priority for the Fed, the Wall Street Journal reports, since the beginning of 2014. They consider low inflation to be a sign of a broader economic woes that could hurt hiring and investments.

But, as The New York Times reported today, the increasing cost of rent, for example, may be doing more harm than good — taking up larger percentages of household income than ever before and making it nearly unattainable for middle-income families. Jay Morelock, an economist at FTN Financial, added that it’s not just about the costs of goods and services.

“While increases in consumer prices are a good sign for many concerned about disinflation, it is not positive for the overall economy unless wages rise in tandem,” Morelock said.

Despite the drawbacks of inflation, it appears that the U.S. will continue to see consumer prices surge for the time being.

“The overall picture is that inflation has stopped falling and is on a gradual uptrend,” said Thomas Costerg, an economist at Standard Chartered PLC in New York.