Spring heat wave commences

April 10, 2026

The consumer price index (CPI) jumped 0.9% in March, the fastest monthly increase since nearing the peak of the pandemic in June 2022. The index jumped 3.3% from a year ago, its hottest annual pace since May 2024. The three-month annualized pace, which better tracks momentum, rose 5.6% from 3.2% in February. Every measure is in the wrong direction for the Federal Reserve. Those gains still understate actual price hikes due to the data lost during the six-week government shutdown late fall. 

The largest single driver of gains was a sharp increase in energy costs, which jumped 10.9% in March, its fastest pace since September 2005. That is when China’s ascent on the global stage was driving a surge in global oil prices. 

Fuel oil, which includes heating and power generation, jumped 30.7%. That is the fastest pace since February 2000 and up 44.2% from a year ago; that is the fastest pace since November 2022. Motor fuel – diesel and gasoline – surged 21.5%, the hottest monthly gain on record. (The data goes back to the 1960s.) That translates to 19.2% from a year ago, the highest since August 2022.

Food prices flatlined, while food away from home rose 0.2%. Restaurants have struggled with foot traffic and margins. A drop in alcohol consumption is particularly costly for restaurants, as that is where margins are greatest. 

Core CPI, which strips out food and energy costs, rose a more tepid 0.2% in March. Shelter costs, which account for about a third of the CPI and an even larger share of the core CPI, rose only 0.3%, in line with what we saw pre-pandemic. Hotel room rates edged up after surging in February. Core nondurable goods drove the rise in goods prices, with an increase of 5.9% between February and March. That is the second fastest monthly increase on record. They are up 7.9% from a year ago, after rising 0.1% from a year ago in February.  

New and used vehicle prices were still subdued. That will not stay that way, especially for used vehicles. Manheim wholesale auction index jumped in March, which means increases in used vehicle prices later this Spring; used electric vehicle demand was particularly strong.   

Core goods prices, which exclude vehicles, rose 0.2% and were up 2.4% from a year ago. That is up from 2.1% in February and the hottest annual pace since June 2023. 

More goods inflation is in the pipeline. Import and export prices soared in February. Import prices do not include tariffs. Foreign producers can no longer afford to share the burden of tariffs with domestic producers after some cost sharing has begun to hike prices again. Export prices tend to lead other goods prices by about six months. Those increases will collide with tariff-related gains this summer.

Core services, which strip out shelter costs, rose 0.2% in March, half the pace of February. That translates to a 3.1% gain from a year ago, up from 2.8% in February. That is the fastest annual pace since September 2025.  The three-month annualized was 4.6%, down from 4.8%, which is a modest reprieve.  The ISM services price index for March hit 70.7, up from 63; that its highest level since October 2022 and suggests more service sector inflation in the pipeline.

Gains in fuel costs drove outsized hikes in air fares, shipping and public transportation. Vehicle insurance held steady, which helped moderate monthly gains in transportation costs. Health insurance costs fell further, which is counterintuitive given the lapsing in subsidies for the ACA and a curb on Medicaid eligibility at the state level. 

Home healthcare cooled in March after surging in recent months. Providers are scaling back the workweek for a limited pool of workers: immigrants play an outsize role in care for the elderly. The workweek in that sector fell three hours per week; providers are relying more on part-time workers.   

The dispersion of price hikes narrowed slightly in March from February, helped by a cooling in food and vehicle prices. That will not last, given the surge in freight costs, shipping and petro-related inputs. Gains in derivatives of oil can take from two to 12 months to fully show up in other prices. The number of items rising in price has remained stubbornly elevated post pandemic and contributed to the persistence of inflation. 

Purchasing power suffered

Inflation-adjusted weekly earnings fell 0.9%, the largest setback since June 2022. Annual increases held up better but if price hikes persist, which they are poised to do, then we could suffer yet another major setback in purchasing power. 

The level of prices, which has moved up faster than earnings over the last five years, remains extremely elevated. That cumulative blow to purchasing power amidst the backdrop of eroding job security and fears of AI, has dealt a huge blow to consumers’ attitudes. More consumer spending gains are concentrated in a smaller share of households, which is why we are seeing spending and attitudes diverge.

The weakness in consumer attitudes is not just a vibe. It is real and related to the inability of too many to keep their spending growing at the pace to which they had become accustomed. Consumers resist, with everything in their power, any reduction in both their living standards and the pace at which they accumulate stuff.