US Inflation Hit 8.5% in March

One month after reporting 7.9% year-over-year inflation for February, the Bureau of Labor Statistics released the March 2022 numbers: 8.5%. The acceleration — 0.6 percentage points in a single month — signaled that inflation was not moderating.

The Energy Spike

The March number was dominated by energy. Russia’s invasion of Ukraine in late February disrupted global energy markets. Gasoline prices rose 48% year-over-year, with the national average exceeding $4 per gallon for the first time since 2008. Fuel oil rose 70.1%. Natural gas rose 21.6%.

Energy inflation has an outsized effect on daily life because it is unavoidable and visible. You see the price every time you pass a gas station. You feel it in the utility bill. And because energy is an input cost for virtually every other good and service, rising energy prices propagate through the entire economy.

Food Continued Climbing

Food prices rose 8.8% year-over-year. The “food at home” category — groceries — rose 10%, the first double-digit increase since 1981. Meats, poultry, fish, and eggs rose 13.7%. Cereals and bakery products rose 9.4%.

These increases hit lower-income households hardest. Food represents a larger share of spending for low-income families, and the cheaper substitutes that economists suggest (store brands, bulk purchases) were also inflating.

The “Transitory” Debate Ended

By March 2022, virtually no serious economist was still describing inflation as transitory. The combination of supply chain disruptions (ongoing), energy price shocks (acute), monetary expansion (structural), and wage pressures (building) made clear that inflation would persist.

The Federal Reserve, which had delayed rate hikes through much of 2021 while describing inflation as temporary, began raising the federal funds rate in March 2022 — starting with a 0.25 percentage point increase that was widely viewed as too little, too late.

The Human Scale

At 8.5% annual inflation, a household spending $60,000 per year needed an additional $5,100 just to maintain the same standard of living. Few households received wage increases of that magnitude. The gap between wage growth and inflation represented a real decline in purchasing power — your paycheck bought less than it did the year before.

For households already stretched thin, the math was worse. When your budget has no slack, even a 5% increase in necessities can force impossible choices: medication or groceries, rent or utilities, car repair or childcare.

March 2022 was not the peak. The peak would come in June at 9.1%. But March was the month when the trajectory became undeniable.