US inflation picked up in March as oil prices surged amid the Iran war, even as economic growth missed estimates and jobless claims dropped to a multi-decade low, reflecting mixed signals.
The core Personal Consumption Expenditures (PCE) Price Index, the Federal Reserve’s preferred inflation gauge, rose 0.3% month-on-month, taking the annual rate to 3.2%, according to Commerce Department data. The reading matched estimates and was the highest since November 2023.
Including food and energy, inflation rose 0.7% for the month, with the annual rate at 3.5%, largely driven by a sharp rise in energy costs.
Economic growth showed signs of moderation. Gross domestic product (GDP) expanded at an annualised rate of 2% in the first quarter, up from 0.5% in the prior quarter but below expectations of 2.2%.
The labour market remained tight. Initial jobless claims fell to 189,000 for the week ended April 25, the lowest level since September 1969, signaling continued stability in hiring.
“This is a split-screen economy,” Heather Long, Chief Economist at Navy Federal Credit Union, told CNBC International. “Companies and investors involved in AI are on fire. Meanwhile, middle and moderate income households are struggling with high gas prices and inflation that’s back at the hottest level in three years.”
The inflation surge was largely driven by goods prices, which rose 1.4%, including an 11.6% jump in energy-related categories. Services inflation was more moderate at 0.3%.
Higher fuel costs appeared to weigh on consumer spending. Personal consumption rose 1.6%, while spending on goods declined 0.1%. A key measure of underlying demand — real final sales to private domestic purchasers — rose 2.5%.
Government spending also supported growth, increasing 4.4% overall, including a 9.3% rise at the federal level.
The data came a day after the Federal Reserve held interest rates steady, though dissent within the Federal Open Market Committee highlighted divisions over the policy path, particularly as inflation remains above target while the labour market stabilises.
(Edited by : Shoma Bhattacharjee)
First Published:
Apr 30, 2026 7:13 PM IST
