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By Steven Weisbart, Chief Economist

The ���ϲ����� Information Institute (I.I.I.) Inflation Watch spreadsheet contains the latest consumer price data from the U.S. Department of Labor Bureau of Labor Statistics (BLS). The CPI-U—the popular measure of consumer prices, sometimes called headline inflation—rose by 2.4 percent in March 2018 vs. March 2017, which BLS describes as “the largest 12-month increase since the period ending March 2017, and higher than the 1.6-percent average annual rate over the past 10 years.” The core CPI—the overall index minus the effects of price changes for food and energy—rose 2.1 percent for the 12 months ending March 2018—its largest increase since the period ending February 2017. (Most economists prefer to use the core, not the headline, inflation measure to avoid the “noise” of volatile prices for those items.) The BLS year-over-year core CPI rate was 1.8 percent, or 1.7 percent since May 2017. The core PCE deflator—the inflation measure that the Federal Reserve prefers—rose by 1.6 percent on a year-over-year basis in February 2018 (the latest available reading). The U.S. economy is still growing nicely, but capacity constraints, and other factors, might increase the likelihood of near-term price increases. Many forecasters project headline CPI for 2018 to range between 2.2 and 2.7 percent.

Price trends for items that more directly affect property/casualty (P/C) insurance claims do not necessarily follow broad-based price indexes. Prices for items such as intensive healthcare affect claims under third-party coverages such as workers compensation and bodily injury liability, as well as first-party coverages like Personal Injury Protection (PIP), med pay and obviously, medical expense insurance. For many years these price increases have outpaced both headline inflation and the overall price index for medical care, and this is still true today. In March 2018, seasonally adjusted on a year-over-year basis, prices for inpatient hospital care rose by 4.6 percent. Seasonally adjusted prices for outpatient hospital services rose by 5.1 percent in March 2018 over March 2017. Price increases for prescription drugs have been moderate lately, rising by 1.9 percent in March 2018 over March 2017—below the core CPI and barely ahead of the core PCE deflator.

Price increases relating to auto insurance property claims have been quite moderate recently. Prices for motor vehicle parts and equipment, which affect not only comprehensive and collision claims, but property damage liability as well, fell by 0.4 percent in March 2018 vs. March 2017. Parts and equipment prices have been flat or falling consistently since 2013 and are now about the level that was reached in May 2011. Prices for motor vehicle repair rose by just 0.1 percent for the 12 months ended March 2018. Prices for motor vehicle body work rose by 2.4 percent year-over-year (not seasonally adjusted). The BLS survey of consumer prices for motor vehicle insurance in March 2018 rose by 8.9 percent year-over-year. Of course, many factors other than pri