Big jump in gasoline, energy costs send wholesale prices up 1 percent in March
Friday, April 12th 2002, 12:00 am
By: News On 6
WASHINGTON (AP) _Wholesale prices shot up 1 percent in March lifted by the biggest jump in gasoline costs in nearly three years.
The big advance in the Producer Price Index, which measures inflation pressures before they reach consumers, comes after wholesale prices edged up 0.2 percent in February, the Labor Department reported Friday.
The jolt last month largely came from a sharp increase in energy prices, especially gasoline. That caused the overall reading on wholesale inflation to be worse than the 0.7 percent increase many analysts were bracing for.
In another report, sales at the nations retailers rose a modest 0.2 percent in March for the second month in a row, the Commerce Department said.
While the increase was smaller than analysts were hoping for, it still shows that consumers _ whose spending accounts for two-thirds of all economic activity in the United States _ are out there shopping. They might be choosy shoppers, but they aren't cutting back.
The 1 percent rise in wholesale prices was the largest increase in 14 months.
But excluding volatile energy and food prices, the ``core'' rate of wholesale inflation nudged up just 0.1 percent in March _ in line with expectations _ after being flat the month before. That suggests most other prices are remaining well-behaved.
In fact, for the 12 months ending in March, wholesale prices actually fell 1.4 percent. While that squeezes company's profit margins it's good news for consumers to the extent that the lower costs impact retail prices.
After being tame for months, energy prices rose sharply in March, up 5.5 percent, the largest increase since June 2000. That followed a mild 0.4 percent rise in February.
Tensions in the Middle East and the recent escalation of violence in the region have contributed to a rise in oil prices. If there's one potential wild card in the United States' economic recovery, it's the fear of an upward spiral in energy costs.
A dramatic jump in prices could slow or possibly derail the recovery. A worst-case scenario is that out-of-control energy prices would cause consumer confidence to tank, force consumers to retrench, send corporate profits tumbling and and snuff out a comeback from the manufacturing sector.
President Bush, who wants to get credit for steering the country out of its first recession in a decade, has been closely monitoring the situation.
The rise in crude-oil prices and increased demand for gasoline are pushing up prices at the pump. Motorists have seen a gasoline prices jump nearly 25 cents a gallon over the past month, a record increase for such a period.
Friday's report showed that gasoline prices, at the wholesale level, rose 21.3 percent in March, the biggest jump since April 1999. Still, gasoline prices are running 14.7 percent below last year's level.
Prices for liquefied petroleum gas, such as propane, went up 23.8 percent. Heating oil prices rose 19.7 percent and residential natural gas costs increased 0.8 percent last month.
Food prices, meanwhile, rose 0.6 percent in March, a moderation from a 1 percent advance the month before.
Car prices dropped 0.4 percent, the biggest decline since October, and prices for women's clothing declined 0.8 percent, the largest decrease since December. Communications equipment costs plunged 1.1 percent, the largest decline since March 1988.
To rescue the economy from the clutches of a recession, the Federal Reserve slashed interest rates 11 times last year. The Fed had plenty of room to act so aggressively because of a long period of well-controlled inflation.
Citing evidence of an economic turnaround, the Fed opted to leave rates alone in January and March. But economists believe the central bank is likely to begin raising rates later this year.