GASOLINE PUSHES U.S. WHOLESALE INFLATION

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GASOLINE PUSHES U.S. WHOLESALE INFLATION

 user 2006-04-18 at 10:09:00 am Views: 59
  • #15139

    Big jump in gasoline prices pushes up inflation at wholesale level
    WASHINGTON 4/06 – A big jump in gasoline prices pushed inflation at the wholesale level up in March at the fastest pace in three months, as oil prices above $70 a barrel sent consumers a high-octane warning of fuel costs ahead.
    The Labor Department reported that wholesale prices rose 0.5% in March following a 1.4% February decline, which had been the largest drop in nearly three years.The March increase was slightly worse than the 0.4% rise Wall Street had been expecting and driven by a 9.1% surge in gasoline prices, the biggest one-month gain since November 2004.Consumers can expect even worse numbers in coming months, given that crude oil prices this week have climbed to records above $70 a barrel. That reflects worries about supply disruptions in Nigeria and increasing tensions between the West and Iran over Tehran’s nuclear program.In other economic news, the Commerce Department reported construction of new homes dropped 7.8% in March. It was the fourth decline in the past six months and provided further evidence that the nation’s five-year housing boom is quieting.The decline pushed construction of new homes down to a seasonally adjusted annual rate of 1.960 million units, the lowest in a year. Housing construction surged 16% in January, reflecting warm weather, but fell 7.8% in February.The 0.5% overall increase in the producer price index, which measures inflation pressures before they reach the consumer, was the biggest one-month gain since a 0.8% increase in December, a jump also driven by surging energy prices.However, outside the volatile energy and food sectors, core inflation rose just 0.1% in March, and increased a moderate 1.7% over the past 12 months.The Federal Reserve has been pushing interest rates up gradually since June 2004 to keep the energy spike from causing widespread inflation problems.Economists are looking for the central bank to boost a key interest rate for a 16th time at its May meeting and there is a growing view that the Fed will keep raising rates into the summer, as inflation worries intensify.
    For March, overall energy prices rose 1.8%, driven entirely by gasoline prices. The cost of natural gas for home use fell 0.5%, while home heating oil prices dropped 3.6% and residential electric power prices 0.7%, the biggest decline in nearly two years. Those declines reflected a warmer-than-normal winter which kept fuel supplies at adequate levels.Food costs rose 0.5% after having fallen 2.7% in February. A 29.2% surge in the price of eggs helped drive the the biggest one-month increase since last September. The price of fish rose by 11.5%, the biggest jump in nearly two decades.Outside of energy and food, the 0.1% rise in core inflation reflected a 0.4% increase in the price of new cars.The big decline in housing activity reflected weakness in single-family construction, which dropped 12% to a seasonally adjusted annual rate of 1.591 million units. Construction of apartments and other multi-family housing rose 15.7% to an annual rate of 369,000 units.Construction was down in all parts of the country, led by a 15.5% drop in the West and an 8.2% decline in the Midwest. Construction activity fell 4.8% in the South and 0.5% in the Northeast.Permits for future construction fell 5.5% in March to an annual rate of 2.059 million units following a 1.7% decline in February.