Consumer prices rose higher than expected in March, signifying that Americans are ready to put the pandemic in the rearview.

The Consumer Price Index increased 0.6% in March, up from 0.4% in February, the Bureau of Labor Statistics reported Tuesday.  The Core CPI, which excludes volatile food and energy prices, rose 0.3%.  Prices increased 2.6% from a year ago, far above the 1.7% rise noted in February for the same period.  

The increase in overall CPI last month surpasses any month since August 2012, while annual inflation is at its highest point since the end of 2018.

March’s rise in inflation is in conjunction with economic re-openings across the country, the continued rollout of coronavirus vaccinations, and the stimulus provided by the COVID-19 relief packages. 

The rise in prices represents “an economy that was locked down from the deepest recession on record and is now soaked in fiscal stimulus,” said Carl Riccadonna, chief economist at Bloomberg . He said the economy “is poised to grow at the fastest pace since 1983.”  

What is still in flux is how long this increase in inflation will last.  Gapen is among economists wondering if inflation will come back down in the second half of 2021. 

“We’re all trying to figure out if this is transitory,” he said.

In the short-term, prices are likely to keep rising. Economists have been raising their outlook for gross domestic product this year citing the vaccinations and stimulus payments. Scott J. Brown, the senior vice president and chief economist for Raymond James & Associates, Inc. said the April report is going to “show an even bigger pop” than what we saw in March.

Riccadonna says it is a waiting game to determine if there are a “pickup in price pressures in meaningful underlying categories” before making a firm prediction about the current inflation numbers

One index that propelled higher last month was gasoline, with a 9.1% increase. This accounted for close to half of the month’s CPI increase alone.  

Stephen Stanley, Chief Economist for Amherst Pierpont Securities LLC, agreed.  “We’re starting to see the beginning period of inflation coming from the re-openings,” he said. 

Airline fares are an index that has not yet reaped the benefits of vaccinations, fiscal stimuli, and reopening of economies. Fares have fallen  15.1% over the past year, although most economists say the decrease should not happen for much longer.  “Clearly the demand for flying has picked up quite a lot”, Stanley said.

Shelter and motor vehicle insurance were visible increases in the Core CPI for March, while apparel and education took a dive.  Economists took note of the acceleration in rent increases as a part of the shelter index.

Eric Kravit, a 30-year-old accountant from Long Island, is currently impacted firsthand by the rise in shelter inflation. As first-time prospective home buyers, he and his spouse have looked at close to 30 homes and placed offers on one quarter of them, all of which have been well above asking price.  

“As a first-time home buyer coming into this market that has never been more geared towards sellers, almost ever in the history of this country, it’s scary to think that while the prices of homes are already so inflated, we need to overbid by an exorbitant amount on top of the already inflated prices just to be considered,” Kravit said.  

Kravit says he and his spouse once placed a bid of $75,000 above the asking price and still did not have their offer accepted. They decided to invest in a home in part because the cost to rent an apartment was comparable to a monthly mortgage payment. 

“Our rent is so high right now we’re basically burning X amount of dollars every month and not getting anything back out of it,” he said. “So at least with a home, it’s looked at as an investment.  Eventually over time, you’re hopeful you’re able to get your money back.”

Economists said it is too early to determine how long the increase in housing prices will continue.  Gapen noted that the increase in rent prices is stronger than initially thought and “might lead us to believe in more persistence in inflation and more upside risk” but indicates that this may not be known until this Fall.