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Wholesale inflation surges 1.1% in March
By Martin Crutsinger, AP Economics Writer
WASHINGTON — Inflation at the wholesale level soared in March at nearly triple the rate expected as the costs of energy and food both climbed rapidly.
The Labor Department reported Tuesday that wholesale prices rose 1.1% last month. That was the second biggest increase in the past 33 years. Analysts had been expecting a much more moderate 0.4% rise in wholesale prices.
Core inflation, which excludes energy and food, was more moderate last month, rising just 0.2%, down from a worrisome 0.5% rise in February.
For the past 12 months, wholesale prices are up 6.9% and core inflation is up 2.7%, the biggest year-over-year increase in nearly two years.
Meanwhile, the New York Federal Reserve said its gauge of manufacturing in New York state showed some stabilization in April after tumbling to a record low in March.
The New York Fed's "Empire State" general business conditions index rose to plus 0.63 in April from minus 22.23 in March. Economists polled by Reuters had expected an April reading of minus 17.5.
The prices paid component rose in April to 57.29, highest since November 2005, from 50.56 in March.
Both reports show inflation pressures, which are occurring at a time when the overall economy is slowing and many analysts believe it may
have toppled into a recession. That raises concerns that 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 in an effort to combat the current slowdown. However, if inflation pressures keep rising, it might be forced to stop cutting interest rates for fear that it would make inflation worse.
In the wholesale inflation report, energy prices jumped 2.9%, the biggest increase since November. The price of gasoline was up 1.3% while natural gas rose 4.2%. Home heating oil shot up 13.1% and diesel fuel, used to power the nation's trucking fleet, increased 15.3%.
Analysts believe the economy will be hit with more energy pressures in coming months, reflecting the fact that crude oil costs are remaining at record levels above $111 a barrel.
Food costs rose 1.2% in March, reflecting big increases in the price of vegetables, rice, and beef.
The April reading of the Empire State index was the first time the index has been in positive territory since January, coming off of the March reading that was the weakest since the index was launched in July 2001.
The survey of manufacturing plants in the state is one of the earliest monthly guideposts to U.S. factory conditions.
Contributing: Reuters
Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
http://www.usatoday.com/money/economy/2008-04-15-ppi-jumps_N.htm
By Martin Crutsinger, AP Economics Writer
WASHINGTON — Inflation at the wholesale level soared in March at nearly triple the rate expected as the costs of energy and food both climbed rapidly.
The Labor Department reported Tuesday that wholesale prices rose 1.1% last month. That was the second biggest increase in the past 33 years. Analysts had been expecting a much more moderate 0.4% rise in wholesale prices.
Core inflation, which excludes energy and food, was more moderate last month, rising just 0.2%, down from a worrisome 0.5% rise in February.
For the past 12 months, wholesale prices are up 6.9% and core inflation is up 2.7%, the biggest year-over-year increase in nearly two years.
Meanwhile, the New York Federal Reserve said its gauge of manufacturing in New York state showed some stabilization in April after tumbling to a record low in March.
The New York Fed's "Empire State" general business conditions index rose to plus 0.63 in April from minus 22.23 in March. Economists polled by Reuters had expected an April reading of minus 17.5.
The prices paid component rose in April to 57.29, highest since November 2005, from 50.56 in March.
Both reports show inflation pressures, which are occurring at a time when the overall economy is slowing and many analysts believe it may
have toppled into a recession. That raises concerns that 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 in an effort to combat the current slowdown. However, if inflation pressures keep rising, it might be forced to stop cutting interest rates for fear that it would make inflation worse.
In the wholesale inflation report, energy prices jumped 2.9%, the biggest increase since November. The price of gasoline was up 1.3% while natural gas rose 4.2%. Home heating oil shot up 13.1% and diesel fuel, used to power the nation's trucking fleet, increased 15.3%.
Analysts believe the economy will be hit with more energy pressures in coming months, reflecting the fact that crude oil costs are remaining at record levels above $111 a barrel.
Food costs rose 1.2% in March, reflecting big increases in the price of vegetables, rice, and beef.
The April reading of the Empire State index was the first time the index has been in positive territory since January, coming off of the March reading that was the weakest since the index was launched in July 2001.
The survey of manufacturing plants in the state is one of the earliest monthly guideposts to U.S. factory conditions.
Contributing: Reuters
Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
http://www.usatoday.com/money/economy/2008-04-15-ppi-jumps_N.htm
