US annual CPI slows in March as housing and transportation costs decline

The consumer price index (CPI), including owner’s housing costs (CPIH), rose 3.4% in the twelve months to March 2025, down from 3.7% in the twelve months to February.

On a monthly basis, the CPI increased by 0.3% in March 2025, compared to a rise of 0.6% in March 2024.

The Owner’s Housing Costs (OOH) component of the CPI increased by 7.2% in the twelve months to March 2025, down from 7.5% in the twelve months to February. Housing costs increased by 0.4% month-on-month, compared to an increase of 0.6% in the previous year.

The consumer price index rose 2.6% in the twelve months to March 2025, down from 2.8% in the twelve months ended February. On a monthly basis, the CPI increased by 0.3% in March 2025, compared to a rise of 0.6% in March 2024.

The main factors affecting the annual inflation rate of the household CPI and the consumer price index are similar, and they share them. However, the out-of-home spending component accounts for about 17% of the CPI, which is the main factor behind the differences between CPI and CPI inflation rates.

This makes the CPI our most comprehensive measure of inflation. We look at this in more detail in Section 4: The Latest Moves of Household CPI Inflation, and we provide an explanation of the CPI in Section 5: The Latest Movements of CPI Inflation. We also cover both the Home CPI and the CPI in Section 3: Observed Price Movements, although the figures reflect the Home CPI.

The slowdown in the rate until March 2025 reflects lower contributions from seven divisions, partially offset by higher contributions by two divisions. The largest contributions to the decline came from the entertainment and culture, housing and domestic services, transportation, restaurants and hotels sectors.

Recent trends in the annual US consumer price index

Recent trends in US CPI data year-on-year reflect ongoing changes in inflation dynamics. Here are some key points:

Inflation levels: The consumer price index showed volatile inflation rates over the past year. After a period of high inflation driven by factors such as supply chain disruptions and rising energy prices, recent data points to moderate inflation.

CPI trends: The core CPI, which excludes volatile items such as food and energy, was a critical indicator. Recent trends suggest that while core inflation remains above historical benchmarks, it has been gradually declining, reflecting a slowdown in price pressures in various sectors.

Impact of monetary policy: The Federal Reserve’s monetary policy, including interest rate hikes and quantitative tightening, has affected inflation trends. Recent CPI data is closely monitored for clues on how effective these policies are in controlling inflation.

Stock Markets: Inflation data can affect stock markets as well. Rising inflation may increase production costs for companies, which can affect profit margins. Investors may adjust their portfolios based on inflation expectations and their impact on corporate earnings.

Sector-specific trends: Different sectors experienced varying inflation pressures. For example, energy prices have shown more volatility, while some sectors such as housing have seen more stable or even declining price trends.

Economic uncertainty: Factors such as geopolitical events, changes in consumer behavior, and global economic conditions continue to influence CPI trends. Recent data reflect the impact of these uncertainties on inflation.

Overall, while year-on-year CPI data indicates a decline from the maximum inflation rates seen earlier, inflation remains a key area of focus by policymakers and analysts.

Factors Influencing Annual US CPI Trends

There are many factors that can influence the trends of the consumer price index in the United States. Here are some of the key factors that have influenced recent US CPI trends:

Supply chain disruptions: Disturbances in global supply chains, caused by factors such as the COVID-19 pandemic, shipping delays, and production bottlenecks, can lead to shortages of goods and components. This can lead to price increases for certain products, affecting the consumer price index.

Energy prices: Energy price fluctuations, especially oil and gas, can have a significant impact on the CPI. High energy prices can lead to higher transportation costs and higher prices for goods and services, contributing to inflation.

Labor market dynamics: Labor market tightness, wage growth, and changes in employment levels can affect patterns of consumer spending and overall demand for goods and services. Strong wage growth could lead to increased consumer spending, contributing to inflation.

Consumer demand: Changes in consumer preferences, spending habits, and general consumer demand can affect the prices of various goods and services. Strong demand for certain products can lead to price increases, affecting the consumer price index.

Global Economic Conditions: Developments in the global economy, including trade dynamics, currency fluctuations and geopolitical events, can affect the prices of imported goods and commodities, affecting the consumer price index.

Inflation expectations: Consumer and business expectations about future inflation can affect current price-setting behavior. Expectations of higher inflation may lead to price adjustments, affecting the consumer price index.

By observing these factors and their impact on the consumer price index, policymakers, economists, and investors can gain insights into inflation trends and make informed decisions about monetary policy, investments, and financial planning.