December 2, 2023

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CPI Report for March 2022 Puts Inflation at 8.5%

Credit…Qilai Shen for The New York Times

Price pressures for household goods, apparel, vehicles and other items showed signs of cooling in March, as companies built up extra inventories of products in storerooms and warehouses and shortages abated.

The monthly price increase in a basket of core goods has leveled off, decelerating from a growth rate of 1 percent in recent months to a 0.4 percent decline in March.

The price of used cars and trucks fell 3.8 percent in March from the month before, and the price of new cars and trucks grew 0.2 percent. The price of household furnishings and supplies rose 1 percent in March, the eighth consecutive monthly increase in that category.

But the disruptions that have plagued supply chains continue to show signs of worsening, suggesting that American consumers may see more shortages of products like electronics — and potentially renewed price increases — in the months to come.

In particular, sweeping lockdowns in China to try to stamp out the Omicron variant of the coronavirus have been posing new risks to America’s supply of manufacturing components and finished goods. Although China has tried to keep its ports functioning through the pandemic, restrictions on truck drivers have stemmed the flow of electronics, car parts and other goods out of the country.

Ariane Curtis, global economist at Capital Economics, said in a note last week that, in developed markets, “renewed shortages — particularly of electrical goods — and higher shipping costs could keep goods inflation higher for longer than we currently expect.”

Freight rates have dipped slightly in recent weeks, but they remain far higher than they were before the pandemic. The price to ship a 40-foot container from China to the West Coast of the United States was $15,817 as of Friday, up from $5,893 one year ago and from $1,584 at the same time in 2019, according to data from Freightos, a freight-tracking firm.

Omair Sharif, the president of the research firm Inflation Insights, said it was impossible to accurately forecast how long Chinese lockdowns might continue to disrupt global supply chains and therefore what their inflationary impact would be. But companies have recently made progress building up inventories that were badly stretched earlier in the pandemic, he said, and those excess goods will help cushion the inflationary impact.

Consumers also appear to be cutting back their spending on goods, probably to offset higher food and gasoline prices, Mr. Sharif said.

“People are pulling back because of inflation and high prices elsewhere, so stuff is starting to pile up a bit at the warehouses,” he said. “With inventories we are definitely in a better position to handle a slowdown without a big knock-on effect on inflation.”

Some car industry experts have said that inventory improvement in used cars could be partly a seasonal trend and that new car prices may have moderated because manufacturers have been cracking down on dealers who charge above list prices.

Phil Levy, the chief economist at Flexport, a logistics company, said there was “tremendous concern within the logistics industry that companies have overdone it on orders, are accumulating excess inventories” and will pull back. But the forecast for inflation is complex, he said, since much of what happens will hinge on consumer demand.

“The crystal ball is unusually murky right now,” Mr. Levy said.