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Rising Consumer Prices Outpace Gains in Wages

By Nell Henderson
Washington Post Staff Writer
Thursday, April 21, 2005; Page E01

Consumer prices rose in March at the fastest rate since October, outpacing gains in most workers' wages, as households paid more for energy, clothing, hotel rooms, medical care and other items, the Labor Department reported yesterday.

The department's consumer price index, the most widely followed inflation gauge, jumped 0.6 percent last month, largely reflecting the 4 percent surge in energy costs.

Energy costs rose 4 percent in March. Excluding the more volatile food and energy costs, inflation rose 0.4 percent, the most in more than two years. (Marcio Jose Sanchez -- AP)

_____In Today's Post_____
Economic Worries Aren't Resonating on Hill (The Washington Post, Apr 21, 2005)

Some economists were more troubled by the rise in prices after stripping out volatile food and energy costs. The so-called core CPI climbed 0.4 percent in March, the biggest increase in more than two years.

The increase in the core CPI was "worrisome," said Joseph Liro, an economist with Stone & McCarthy Research Associates. Its sustained rise "provides evidence that the spike in energy prices is beginning to pass through to other consumer prices."

Other economists cautioned against seeing the pickup in overall prices as primarily driven by energy costs. The stronger economy itself gives many companies more power to raise prices, said Robert DiClemente, chief U.S. economist at Citigroup.

"Inflation is still low, but there is some concern it's accelerating," DiClemente said.

Concerns about inflation helped drive financial markets down yesterday. The Dow Jones industrial average fell 115.05 points, or 1.1 percent, to close at 10,012.36, its lowest close since October. The average is now down 7.15 percent for the year.

In another report, the Federal Reserve said manufacturers, retailers and services firms in much of the country "were able to pass at least a portion of cost increases along to their customers" from late February through early April.

The Fed's report used words such as "solid" and "robust" to describe the pace of expansion in parts of the country. The report summarizes economic conditions in the districts served by the 12 regional Fed banks.

The CPI report reinforced analysts' expectations that the Fed plans to continue raising interest rates to keep inflation under control.

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