Consumer prices edge up, industrial output rises

Tuesday, April 17th 2001, 12:00 am

By: News On 6

WASHINGTON (AP) _ Consumer prices edged up 0.1 percent in March, the smallest rise in seven months, as energy prices retreated, the government reported Tuesday. Industrial production rose for the first time since September.

The small advance in the Labor Department's Consumer Price Index, the government's most closely watched inflation gauge, followed a 0.3 percent rise in February.

Even though energy prices _ including those for natural gas and gasoline _ fell last month, that might provide little comfort to Americans who have been hit with sharply higher bills to heat their homes and to power their cars.

In another report, the Federal Reserve said industrial production at the nation's factories, utilities and mines rose a solid 0.4 percent in March, exceeding many analysts' expectations. They were forecasting a decline. In February, industrial output fell 0.4 percent, the fifth monthly drop in a row.

The March performance showed gains across the board, with factory output growing by 0.3 percent, gas and electric utilities increasing production by 1.1 percent and mining up by 0.8 percent. In February, output at factories and utilities fell while production at mines rose.

The nation's industrial sector has been bearing the brunt of the economic slowdown and many believe it is in recession. But Tuesday's report provided a glimmer of hope that there may be better times ahead.

Prices for ``core'' goods _ which exclude the volatile food and energy sectors _ rose 0.2 percent in March, after a 0.3 percent increase in February.

The performance in March's overall CPI and the underlying inflation rate as measured by the core prices matched analysts' expectations.

With inflation posing little risk to the economy, the Federal Reserve has plenty of latitude in continuing to lower interest rates to rejuvenate economic growth.

Trying to stave off recession, the Fed has cut interest rates three times this year, totaling 1.5 percentage points. The lower rates are aimed at boosting economic growth.

In a third report, housing construction fell 1.3 percent in March to an annual rate of 1.613 million units, a still-healthy level given the economic slowdown.

The 0.1 percent rise in overall consumer prices in March was the smallest increase since August 2000, when they edged up by the same amount.

So far this year, consumer prices are rising at an annual rate of 4.0 percent, compared with a 3.4 percent increase for all of last year. The pickup mostly reflects higher energy prices, which have risen because of production limits and strong demand.

In March, energy prices fell 2.1 percent, the biggest drop since August, after falling 0.2 percent in February.

Natural gas prices declined by 2.1 percent, gasoline prices by 3.8 percent and home heating oil by 3.0 percent.

Even though natural gas prices have eased since peaking in December, costs remain much higher than they were in the winter of 1999. Experts say there's a high probability that motorists this summer will pay more for gasoline than the average $1.53 cents a gallon they paid last summer, given rising crude oil prices and strong demand.

Food prices, meanwhile, crept up 0.2 percent in March, after a 0.5 percent rise the month before. Falling prices for vegetables and dairy products helped to blunt rising prices for fruit, beef and poultry.

Elsewhere in the report, prices for airline fares fell 1.4 percent and new-car prices declined by 0.3 percent.

But prescription drug costs continued to flare. They rose 0.6 percent in March after an 0.8 percent increase in February. The introduction of more expensive new drugs and strong demand by aging baby boomers are among the factors leading to the rise in drug costs, economists say.

Clothing costs also continued to rise, increasing 0.4 percent in March, on top of a 0.8 percent gain the month before. The increases reflect the arrival of higher-priced spring and summer clothing in stores.