Wholesale prices soared in March
WASHINGTON (AP) - April 15, 2008 The Labor Department reported Tuesday that wholesale prices rose
by 1.1 percent last month, the largest increase since a 2.6 percent
rise last November. The November gain in the Producer Price Index
was the biggest one-month jump in 33 years.
Analysts had expected a much more moderate 0.4 percent rise in
wholesale prices for the month. However, food costs, which had
fallen by 0.5 percent in February, leapt by 1.2 percent last month,
propelled upward by big gains in vegetables and beef and the
biggest increase in rice prices in more than five years. Those were
far higher increases in food prices than expected.
Core inflation, which excludes energy and food, was better
behaved last month, rising by just 0.2 percent, down from a
worrisome 0.5 percent rise in February.
But with the crude oil price rising to a record close of $113.79
per barrel on Tuesday, analysts said consumers should be braced for
more bad inflation news to come.
"Wholesale prices are rising and the consumer should expect
more shocks at the supermarket and the gas station," said Joel
Naroff, chief economist at Naroff Economic Advisors.
The surge in energy and food costs is coming just as
unemployment is rising and many economists believe the country has
fallen into a recession, developments that have taken a toll on
President Bush's approval ratings. Seven out of 10 Americans now
disapprove of Bush's handling of the economy, an all-time high,
according to the latest Washington Post-ABC News poll.
Democrats, hoping to win the White House in November, said the
string of bad economic statistics showed how Americans were
hurting.
"As the paychecks of middle class families get smaller and
their homes lose value, their wallets are being further emptied by
the skyrocketing everyday costs of gas and food," said Sen.
Charles Schumer, D-N.Y.
On Wall Street, stocks climbed higher as investors were
encouraged by a report showing a modest rebound in manufacturing in
the New York region. The Dow Jones industrial average rose 60.41
points to close at 12,362.47.
For the past 12 months, wholesale prices are up by 6.9 percent
and core inflation is up by 2.7 percent, the biggest year-over-year
increase in nearly two years.
With the economy slowing and inflation rising, some analysts are
concerned the country could be facing another bout of stagflation,
the malady that last occurred in the 1970s when economic growth
stagnated but inflation kept rising.
Such a development would put the Federal Reserve in a bind. The
central bank has been cutting interest rates to combat the current
slowdown, but if inflation pressures keep rising, it might be
forced to stop cutting interest rates for fear that it would make
inflation worse.
For March, energy prices jumped 2.9 percent, the biggest
increase since November. The price of gasoline was up 1.3 percent
while natural gas rose by 4.2 percent. Home heating oil shot up by
13.1 percent and diesel fuel, used to power the nation's trucking
fleet, increased by 15.3 percent.
Outside of food and energy, the price of soap and detergent
jumped 2 percent, the biggest gain in more than two years, while
pet food increased by 1.3 percent.
However, the price of new cars dropped by 0.2 percent and the
cost of light trucks was down 0.3 percent, indicating the struggles
automakers face as a weak economy dampens demand.
The government will report on consumer prices Wednesday.
Analysts said they still expect this report would show a moderate
increase of 0.3 percent.