Here’s the inflation breakdown for March 2023 — in one chart

On Apr 12, 2023

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Inflation continued to retreat in March as energy prices pulled back from a year ago, when they began to spike due to Russia’s invasion of Ukraine.

But swings in gasoline and other energy mask price pressures that, while easing, remain under the surface, economists said.

“It’s improving and the economy is cooling, but it’s still far from tepid,” Diane Swonk, chief economist at KPMG, said of inflation.

The consumer price index, a key gauge of inflation, rose by 5% in March relative to 12 months earlier, the U.S. Bureau of Labor Statistics said Wednesday.

The index measures price changes across a broad basket of consumer goods and services, like food, housing, electronics and recreation.

The latest annual reading declined from 6% in February. The reduction doesn’t mean prices fell; they’re still rising, just more slowly than a year ago.

A little bit of inflation is good — policymakers aim for about 2% a year, according to a different but related measure.

While still “painfully high,” inflation has eased significantly from its peak of more than 9% in June 2022, said Mark Zandi, chief economist of Moody’s Analytics. Inflation seems poised to fall back to policymakers’ target by this time next year, barring any unforeseen derailments, he said.

“Inflation is fundamentally moderating,” Zandi said. “And all the trend lines look good.

“I can say that with increasing confidence.”

What drove inflation in March 2023

Housing was a “notable” inflation driver in March and over the past year, according to the BLS.

The shelter index increased 8.2% in the last year, accounting for over 60% of the total increase in consumer prices after stripping out the volatile energy and food categories. Other notable annual increases include motor vehicle insurance (15%), household furnishings and operations (5.6%), recreation (4.8%) and new vehicles (6.1%), the bureau said.

“There are a lot of categories that continue to see outsized increases month after month,” said Greg McBride, chief financial analyst at Bankrate. “And [some of] those are categories that are staples in the household budget.”

“We’ve got to see improvement in terms of moderating price pressures across a broad range of categories,” he added.

The overall energy index is down 6.4% in the past year.

Average U.S. gasoline prices topped out over $5 a gallon in June 2022, following a surge in oil prices after Russia invaded Ukraine in February 2022. The price increase for both regular motor gasoline and diesel fuel from February to March 2022 was the largest monthly gain on record, according to the U.S. Department of Transportation.

It’s improving and the economy is cooling, but it’s still far from tepid.

Diane Swonk

chief economist at KPMG

To compare, average pump prices were about $3.54 a gallon…