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March Inflation Blamed Mostly on Gas
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Builders broke ground on 0.8 percent more homes in March than in the month before, the Commerce Department said yesterday. Analysts said that meager gain showed no rebound in the housing market but was still an improvement after many months of sharp declines. The number of housing starts was 26 percent lower than a year earlier.
Another encouraging sign was that permits for new construction, which are seen as a signal of future activity, rose 0.8 percent.
Manufacturing output rose 0.7 percent in March, as factories made more machinery, computers and home electronic equipment, the Federal Reserve reported yesterday.
Other recent figures showed a strong 0.7 percent increase in retail sales last month, as unemployment remained low at 4.4 percent.
"The economy is doing very well," said Richard Yamarone, director of economic research at Argus Research Corp. "The consumer really is resilient."
Other forecasters expect consumers to pull back on spending this spring because of rising gasoline prices, higher debt payments and falling home prices.
"People are being squeezed," said Nigel Gault, U.S. economist for Global Insight.
Meanwhile, inflation pressures remain strong, several analysts said. Economic growth overseas is pushing global prices higher for food, oil, metals and other commodities. The U.S. dollar has been falling, which makes imports more expensive. Rents are still rising. The effort by the U.S. government to encourage more production of ethanol, for use as an alternative fuel, has helped push up prices for corn, the major grain used in producing meat.
The average national price for a gallon of regular gasoline was $2.87 yesterday, up from $2.55 a month earlier, according to the AAA automobile club. Prices exceed $3 a gallon in parts of the Washington area.
Federal Reserve policymakers forecast inflation to drift lower this year because of slow economic growth. But they have stressed in recent weeks that they remain worried that price pressures may prove to be stubborn. They agreed at their meeting in March that they might have to raise interest rates to force inflation down, according to minutes of the session.
"We're far from out of the woods" on inflation, Yamarone said. "There is plenty to be concerned about."
