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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.
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