In March, gasoline prices rocketed 18.3% and accounted for more than half the overall monthly gain in consumer prices.
Some economists and investors got excited by the fact that core consumer prices, which exclude food and energy, ticked up only 0.3% in March, compared with 0.5% in February.
But whether inflation has peaked is unclear, and even if it has, it almost certainly won’t drop anywhere near the Federal Reserve’s annualized target of 2% anytime soon.
Consumer prices overall rose 1.2% in March from February and soared 8.5% in the 12 months through March, a 40-year high.
Food and energy prices matter. They account for a major portion of consumers’ budgets, and that portion is growing as their prices jump. In March, the gasoline price index rocketed 18.3% and accounted for more than half the overall monthly gain in consumer prices. The food price index rose 1%.
Lisa Beilfuss of Barron’s notes several negative signs for inflation. First, the producer price index skyrocketed a record 11.2% in the 12 months through March. That could be a good predictor for what happens to the consumer price index.
In addition, one-year consumer inflation expectations increased to a record high of 6.6% in March, according to a report from the New York Fed.
Commodity and Shelter Prices
A further rise in commodity prices, which have soared since Russia invaded Ukraine in February, could easily push inflation higher, the Citigroup economist Veronica Clark told Beilfuss. The S&P GSCI Index of commodity prices has leaped 39% so far this year.
Richard Farr, chief market strategist at Merion Capital Group, told Beilfuss he’s concerned about shelter costs, which rose 5% in March from a year earlier. A 2021 report from researchers at the Dallas Federal Reserve Bank predicted that number would rise to 6.9% by December 2023.
But Farr says that forecast is too low. Home prices have continued to rise since the survey was conducted, he noted.
Stocks That Can Withstand Inflation
Amid the raging inflation, investors are looking for stocks of companies that can withstand or even benefit from rising prices.
For example, travel stocks rose last week, with consumers apparently willing to pay up for trips after being stuck at home throughout the covid pandemic, The Wall Street Journal notes.
Airline, hotel and cruise shares gained. Delta Air Lines (DAL) – Get Delta Air Lines, Inc. Report sparked the rally when one of its executives said demand is so strong that the carrier would raise fares 7.5% to 10% in the second quarter.
Delta stock soared 11% over the past week. Hyatt Hotels (H) – Get Hyatt Hotels Corporation Class A Report climbed 12%. And Carnival Cruise (CCL) – Get Carnival Corporation Report gained 3%.
