Consumer sentiment plunges as prices spike

Consumer prices surged in March, driven by higher gas and fuel oil prices. The Consumer Price Index (CPI) rose 0.9% in March, the highest monthly jump in nearly four years, and 3.3% YoY, the Bureau of Labor Statistics reported last week.

Before the start of the Iran war, inflation showed signs of cooling last month, up 0.3% month over month in February and 2.4% YoY.

Core CPI, which excludes food and energy prices, rose 0.2% in March.

The University of Michigan also released preliminary results of its Survey of Consumers on Friday, finding consumer sentiment sank 10.7% to 47.6, its lowest point ever, in April. This continues a notable decline that began at the onset of the war. The majority of interviews for the survey occurred before the ceasefire announcement earlier in the week.

Zoom in: Energy prices climbed 10.9%, pushed up by gas prices—surpassing $4 a gallon amid the Middle East conflict—which flew up 21.2% month over month, and fuel oil prices, which jumped 30.7%.

After seeing a 0.4% increase in February, overall food inflation was flat in March, with food at home down 0.2%. Four of the six main grocery indexes saw declines, headlined by a 3.4% drop in egg prices. Prices for fruits and vegetables climbed 1%, thanks to a sharp 15.3% price increase for tomatoes, with other food at home remaining flat. Meanwhile, alcoholic beverages were up 0.3%.

While food prices remain steady, skyrocketing fertilizer prices—and an incoming Super El Niño—could elevate prices for farmers, and impact crop yields, which could eventually be passed down to consumers. In the meantime, consumers could be changing their grocery shopping habits due to high gas prices, turning to fewer store visits and more online shopping.

Across other retail categories, apparel prices climbed 1%, with highest increases coming from men’s pants and shorts (2.6%), women’s footwear (2.3%), and women’s suits and separates (2.3%). Toy prices rose 2.3%, and personal care products increased 0.4%.