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US inflation rises on spike in fuel prices
April 19, 2006
Washington - A big jump in petrol prices pushed US 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 expensive fuel costs ahead.
The Labour Department reported that wholesale prices rose by 0.5
percent in March following a 1.4 percent decline in February, which had been the largest drop in nearly three years.
The March increase was slightly worse than the 0.4 percent rise that Wall Street had been expecting and was driven by a 9.1 percent surge in petrol prices, the biggest one-month gain since November 2004.
Introducing former Representative Rob Portman on Tuesday as his choice to be budget director, President George W. Bush lamented the high fuel prices and said he attributes it to increasing demand and also concerns about perceptions of possible disruptions in supplies.
But, Bush added, "I'm also mindful that government has a responsibility to watch very carefully and to investigate any price gouging, and we'll do that."
Consumers can expect even worse numbers in coming months, given that crude oil prices this week have climbed to new records, hitting $71.60 per barrel in trading on Tuesday. The price jump reflects worries about supply disruptions in Nigeria and increasing tensions between the West and Iran over Tehran's nuclear program.
But on Wall Street, investors focused instead on the release of minutes of the Federal Reserve's March 28 meeting, which gave hope that a long string of interest rate increases could be coming to an end.
The Dow Jones industrial average soared by 194.99 points to close at 11 268.77.
Private private economists said so far there seems to be little evidence that rising energy prices are spilling over into more widespread inflation problems.
Sherry Cooper, chief economist at BMO Nesbitt Burns, noted that over the past 12 months, wholesale inflation has risen just 3.5
percent, marking one of the country's slowest 12-month changes in many years.
In other economic news, the Commerce Department reported that construction of new homes dropped by 7.8 percent 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 down.
The decline pushed the construction of new homes down to a seasonally adjusted annual rate of 1.960 million units, the lowest rate in a year. Housing construction had surged by 16 percent in January, reflecting warm weather, but then fell by 7.8 percent in February.
The 0.5 percent 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 percent increase in December, a jump that was also driven by surging energy prices.
However, outside of the volatile energy and food sectors, core inflation was well-behaved in March, rising by just 0.1 percent, leaving core inflation rising by a moderate 1.7 percent over the past 12 months.
For March, overall energy prices were up 1.8 percent with all of the increase reflected by the big jump in petrol prices. The cost of natural gas for home use fell by 0.5 percent while home heating oil prices were down 3.6 percent and residential electric power prices dropped by 0.7 percent, the biggest decline in nearly two years. Those declines reflected a warmer-than-normal winter which kept fuel supplies at adequate levels.
Food costs were up 0.5 percent after having fallen by 2.7
percent in February. The increase was driven by a 29.2 percent surge in the price of eggs, the biggest one-month gain since last September. The price of fish rose by 11.5 percent, the biggest increase in nearly two decades.
Outside of energy and food, the 0.1 percent rise in core inflation reflected a 0.4 percent increase in the price of new cars.
The big decline in housing activity reflected weakness in single-family construction which dropped 12 percent to a seasonally adjusted annual rate of 1.591 million units. Construction of apartments and other multi-family housing rose by 15.7 percent to an annual rate of 369 000 units.
Construction was down in all parts of the country, led by a 15.5 percent drop in the West and an 8.2 percent decline in the Midwest. Construction activity fell 4.8 percent in the South and was down 0.5 percent in the Northeast.
Permits for future construction fell by 5.5 percent in March to an annual rate of 2.059 million units following a decline of 1.7
percent in February. - Sapa-AP
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