March Inflation Blamed Mostly on Gas
Wednesday, April 18, 2007
Surging gasoline prices pushed inflation higher last month, the Labor Department reported yesterday, with the increases eating up workers' pay gains.
But other government data showed that, outside of fuel costs, prices did not rise much in March, while home construction appeared to stabilize and factories stepped up production.
The figures, combined with other economic data released recently, depict a U.S. economy that is holding up despite a slump in housing, several analysts said yesterday.
"We ended the quarter with the economy steadying itself and not spiraling down into a recession," said Stuart G. Hoffman, chief economist at PNC Financial Services. He estimated that the economy was growing at a moderate annual pace, 2 to 2.5 percent. "This is not an economy that is regaining momentum . . . nor is it losing momentum," he said.
Wall Street appeared to share that assessment. The Dow Jones industrial average and Standard & Poor's 500-stock index closed up modestly.
Consumers had reason to be grumpier. The Labor Department's consumer price index, a widely followed inflation measure, rose a seasonally adjusted 0.6 percent last month, the biggest increase since a similar jump in April last year. The index was 2.8 percent higher than a year earlier.
The March increase primarily reflected a 5.9 percent rise in fuel prices, including a 10.6 percent jump at gasoline pumps.
In the first three months this year, fuel prices rose at a 22.9 percent annual rate. In comparison, fuel costs rose 2.6 percent over all of 2006, with a steep rise early in the year followed by a tumble later.
Because of the fuel jolt, inflation outpaced wage growth last month. Average weekly earnings declined 0.1 percent in March, after adjusting for inflation, the Labor Department said.
Economists seek a sense of underlying inflation by looking at "core" inflation, which excludes food and energy prices. And the core consumer price index rose by only 0.1 percent last month, the slowest pace in three months.
The mild rise in core inflation largely reflected a sharp, 1 percent drop in clothing prices in March, combined with smaller price increases for food, housing and medical care.
"Yes, gasoline is certainly adding to the costs for us all, but so far it's not bleeding into other prices," Hoffman said. He said other recent figures show that economic growth remains on track.