The March Everyday Price Index (EPI) increased 1.4 percent, a much larger jump than the 0.2 percent increase in the Consumer Price Index (CPI). Both indices were led higher by Food and Energy costs. Within Foods, Meats (+1.2 percent), Dairy (+1.0 percent), and Fresh Fruits (+3.1 percent) drove grocery bills higher while the price of dining out also increased (+0.3 percent). On the Energy side, a 5.0 percent increase in Motor Fuel further strained daily budgets.
Food and energy prices are volatile. Although the Motor Fuel index jumped significantly in March, year-over-year the index has declined 8.9 percent. Utility bills, on the other hand, were higher in March (+1.3 percent) and year-over-year (+6.7 percent). Even though trips to the grocery store hurt consumer wallets in March, year-over-year grocery bills declined 0.7 percent. Unfortunately, a 5.0 percent year-over-year increase in restaurant checks offset cheaper meals at home.
The EPI measures the prices of goods and services purchased on an everyday basis. It is designed to reflect an average household’s day-to-day inflation by tracking the prices most relevant to frequent purchases. For example, consumers paid more to keep in touch with family and friends in March. Internet Services increased 0.5 percent, and though Telephone Services dipped 0.9 percent in March they have grown 8.6 percent year-over-year. Parents spent more on child care (+0.5 percent) but catching a movie or concert was cheaper (-0.3 percent).
Is March the beginning of a pick up in inflation or just a blip? Since 2008, observers have watched the Federal Reserve’s Quantitative Easing program and its effects on the economy. Some have feared an inflationary surge from the huge increase in bank reserves, but thus far it has not materialized. Instead, record liquidity remains on bank balance sheets and consumer and business borrowing is muted . Therefore, while the risk of an inflationary surge remains actual inflation remains contained. Check back next week for AIER’s upcoming Inflation Report which explores credit supply and demand as drivers of inflation.
About the EPI
AIER’s Everyday Price Index (EPI) measures the changing prices of frequently purchased items like food and utilities. We do this by selecting the prices of goods and services from the thousands collected monthly by the Bureau of Labor Statistics in computing its Consumer Price Index. The EPI basket contains only prices of goods and services that Americans typically buy at least once a month, excluding contractually fixed purchases such as mortgages. Our staff economists weight each EPI category in proportion to its share of Americans’ average monthly expenditures. In order to better reflect the out-of-pocket prices that consumers experience on a daily basis, the EPI does not seasonally adjust prices.
To learn more about our methodology, view the weights assigned to each component, and browse past EPI updates, visit AIER’s EPI Methodology page.