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Gas prices push wholesale costs higher

- Associated Press - Thursday, April 14, 2011

A spike in the cost of gasoline pushed wholesale prices higher last month, a trend that could limit consumer spending in the coming months.

Still, most economists don't expect that to lead to widespread inflation because businesses are wary of raising prices when most people aren't getting significant pay increases.

Gas at the wholesale level jumped 5.7 percent in March. Much of the price increase is being passed along to consumers, who on Thursday paid an average of $3.81 for a gallon.

Diane Swonk, chief economist at Mesirow Financial, said the economy is seeing "a blip" in inflation because of the rise in gas prices as well as higher food costs. But "it is just very hard for the broader economy to hold price increases for very long when that blip is causing consumers to curtail spending elsewhere," she said.

Overall, the producer price index, which measures price changes before they reach the consumer, rose 0.7 percent last month and is up 5.8 percent over the past year, the Labor Department said Thursday. Food prices eased slightly in March after having risen in the previous month by the most in 36 years.

Excluding volatile food and energy, inflation at the wholesale level was relatively tame.

There were some signs that could change. New cars rose by the most in nearly two years, and the cost of some types of furniture jumped. Still, core prices have risen by less than 2 percent over the past year, well within the Federal Reserve's preferred range for inflation.

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