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Associated Press
Inflation Surges on Energy, Food Costs
Wednesday April 20, 4:08 pm ET
By Martin Crutsinger, AP Economics Writer
March Inflation Shoots Up 0.6 Percent, Biggest Surge in Five Months, on Energy Costs
WASHINGTON (AP) -- It isn't just gasoline prices that are pinching consumers' wallets. The cost of health care, clothing, hotel rooms and airline travel all jumped last month, pushing the core inflation rate up at the fastest pace in 2 1/2 years.
The Labor Department reported Wednesday that its closely watched Consumer Price Index increased by 0.6 percent in March, the biggest rise since October.
Even more worrisome, prices excluding the volatile energy and food categories rose by 0.4 percent last month, the biggest one-month increase for core inflation since August 2002.
Underscoring that inflation pressures are mounting, the Federal Reserve said Wednesday in its latest survey of business conditions in the Fed's 12 regions that "price pressures have intensified in a number of districts and most report that high or rising energy prices are a concern across sectors."
The Labor Department reported that gasoline prices climbed 7.9 percent last month, the biggest increase since an 8 percent surge in October.
Both times, the increases were driven by soaring global oil prices -- a record $55 per barrel in October, a new high of $57 per barrel at the beginning of this month.
While crude oil prices have retreated recently, gasoline prices are expected to remain above $2 per gallon through the summer driving season.
Consumer confidence is sagging because of the rising in energy prices, causing politicians from both parties to worry that voters may blame them for the problem.
President Bush on Wednesday urged Congress to pass his long-stalled energy bill before lawmakers take their summer break. But he acknowledged that the measure will not affect prices until much later.
Democrats took on Bush's economic policies, pointing not just to the latest surge in energy prices. They cited a separate Labor Department report showing that average weekly wages for nonsupervisory workers, after adjusting for inflation, fell by 0.3 percent in March, the second straight monthly decline.
"Wages aren't keeping up with the higher prices for gasoline, health care and even clothing," said Sen. Jack Reed, a top Democrat on the Joint Economic Committee.
So far this year, inflation at the consumer level is rising at an annual rate of 4.3 percent, compared with a 3.3 percent increase for all of 2004.
Excluding food and energy, core inflation is rising at an annual rate of 3.3 percent in the first three months of this year, significantly higher than the 2.5 percent increase in 2004.
Investors have gone from worrying about whether surging oil prices will spill out into higher overall inflation to fearing that the most recent oil shock will produce a patch of weak economic growth, which last occurred in mid-2004.
The Fed gradually has raised interest rates over the past year as a hedge against inflation. Analysts said the central bank could find itself in the difficult position of choosing between fighting slower growth by cutting interest rates, or higher inflation, which would require rate increases.
The Fed's latest survey of regional conditions said that economic growth was continuing from late February through early April but that the growth ranged from "robust" to "moderate" to "uneven."
"The Fed is caught," said David Wyss, chief economist at Standard & Poor's in New York. "The Fed would like to keep interest rates low to keep the economy moving, but on the other hand they have to fight against inflation."
Wyss and other analysts said the Fed probably would continue to raise rates by one quarter of a percentage point at its upcoming meetings, though a one-half point jump could happen if energy-driven inflation worsened.
"Energy prices are the key wild card for the economy," said Mark Zandi, chief economist at Economy.com.
For March, energy costs shot up 4 percent, the biggest one-month gain since a similar rise in October. Prices for gasoline, home heating oil and natural gas all increased.
Food costs rose by 0.2 percent in March, following a gain of 0.1 percent in February. Prices for pork and fresh fruit fell.
Clothing costs, which had declined, jumped 0.8 percent in March, the biggest one-month gain in 12 months. Hotel room prices rose a record 3.9 percent.
Some analysts suggested that both increases were one-month aberrations that reflected the government's inability to adjust for the impact of an early Easter, which was in March this year.
Airline ticket prices rose by 2.7 percent, the largest increase in nearly four years, reflecting efforts to deal with surging fuel costs. Health care costs were up 0.5 percent in March after an even bigger 0.6 percent increase in February.
Labor's Consumer Price Index: http://www.bls.gov/cpi
Federal Reserve's economic survey: http://www.federalreserve.gov
Associated Press
Inflation Surges on Energy, Food Costs
Wednesday April 20, 4:08 pm ET
By Martin Crutsinger, AP Economics Writer
March Inflation Shoots Up 0.6 Percent, Biggest Surge in Five Months, on Energy Costs
WASHINGTON (AP) -- It isn't just gasoline prices that are pinching consumers' wallets. The cost of health care, clothing, hotel rooms and airline travel all jumped last month, pushing the core inflation rate up at the fastest pace in 2 1/2 years.
The Labor Department reported Wednesday that its closely watched Consumer Price Index increased by 0.6 percent in March, the biggest rise since October.
Even more worrisome, prices excluding the volatile energy and food categories rose by 0.4 percent last month, the biggest one-month increase for core inflation since August 2002.
Underscoring that inflation pressures are mounting, the Federal Reserve said Wednesday in its latest survey of business conditions in the Fed's 12 regions that "price pressures have intensified in a number of districts and most report that high or rising energy prices are a concern across sectors."
The Labor Department reported that gasoline prices climbed 7.9 percent last month, the biggest increase since an 8 percent surge in October.
Both times, the increases were driven by soaring global oil prices -- a record $55 per barrel in October, a new high of $57 per barrel at the beginning of this month.
While crude oil prices have retreated recently, gasoline prices are expected to remain above $2 per gallon through the summer driving season.
Consumer confidence is sagging because of the rising in energy prices, causing politicians from both parties to worry that voters may blame them for the problem.
President Bush on Wednesday urged Congress to pass his long-stalled energy bill before lawmakers take their summer break. But he acknowledged that the measure will not affect prices until much later.
Democrats took on Bush's economic policies, pointing not just to the latest surge in energy prices. They cited a separate Labor Department report showing that average weekly wages for nonsupervisory workers, after adjusting for inflation, fell by 0.3 percent in March, the second straight monthly decline.
"Wages aren't keeping up with the higher prices for gasoline, health care and even clothing," said Sen. Jack Reed, a top Democrat on the Joint Economic Committee.
So far this year, inflation at the consumer level is rising at an annual rate of 4.3 percent, compared with a 3.3 percent increase for all of 2004.
Excluding food and energy, core inflation is rising at an annual rate of 3.3 percent in the first three months of this year, significantly higher than the 2.5 percent increase in 2004.
Investors have gone from worrying about whether surging oil prices will spill out into higher overall inflation to fearing that the most recent oil shock will produce a patch of weak economic growth, which last occurred in mid-2004.
The Fed gradually has raised interest rates over the past year as a hedge against inflation. Analysts said the central bank could find itself in the difficult position of choosing between fighting slower growth by cutting interest rates, or higher inflation, which would require rate increases.
The Fed's latest survey of regional conditions said that economic growth was continuing from late February through early April but that the growth ranged from "robust" to "moderate" to "uneven."
"The Fed is caught," said David Wyss, chief economist at Standard & Poor's in New York. "The Fed would like to keep interest rates low to keep the economy moving, but on the other hand they have to fight against inflation."
Wyss and other analysts said the Fed probably would continue to raise rates by one quarter of a percentage point at its upcoming meetings, though a one-half point jump could happen if energy-driven inflation worsened.
"Energy prices are the key wild card for the economy," said Mark Zandi, chief economist at Economy.com.
For March, energy costs shot up 4 percent, the biggest one-month gain since a similar rise in October. Prices for gasoline, home heating oil and natural gas all increased.
Food costs rose by 0.2 percent in March, following a gain of 0.1 percent in February. Prices for pork and fresh fruit fell.
Clothing costs, which had declined, jumped 0.8 percent in March, the biggest one-month gain in 12 months. Hotel room prices rose a record 3.9 percent.
Some analysts suggested that both increases were one-month aberrations that reflected the government's inability to adjust for the impact of an early Easter, which was in March this year.
Airline ticket prices rose by 2.7 percent, the largest increase in nearly four years, reflecting efforts to deal with surging fuel costs. Health care costs were up 0.5 percent in March after an even bigger 0.6 percent increase in February.
Labor's Consumer Price Index: http://www.bls.gov/cpi
Federal Reserve's economic survey: http://www.federalreserve.gov
The price of oil has impacted everything, root cause and effect.
