- The Washington Times - Wednesday, April 16, 2008

ASSOCIATED PRESS

Inflation at the wholesale level soared in March at nearly triple the rate that had been forecast as energy prices kept rising and food costs posted a much bigger jump than anticipated.

The Labor Department said yesterday that wholesale prices rose by 1.1 percent last month, the largest increase since a 2.6 percent rise last November. The November gain in the Producer Price Index was the biggest one-month jump in 33 years.

Analysts had expected a much more moderate 0.4 percent rise in wholesale prices for the month. However, food costs, which had fallen by 0.5 percent in February, leapt by 1.2 percent last month, propelled upward by big gains in vegetables and beef prices and the biggest increase in rice prices in more than five years. Those were far higher increases in food prices than expected.

Core inflation, which excludes energy and food, was better behaved last month, rising by just 0.2 percent, down from a worrisome 0.5 percent rise in February.

“Wholesale prices are rising, and the consumer should expect more shocks at the supermarket and the gas station,” said Joel Naroff, chief economist at Naroff Economic Advisors.

The surge in energy and food costs is coming just as unemployment is rising, and many economists believe the country has fallen into a recession, developments that have taken a toll on President Bush’s approval ratings.

For the past 12 months, wholesale prices are up by 6.9 percent and core inflation is up by 2.7 percent, the biggest year-over-year increase in nearly two years.

With the economy slowing and inflation rising, some analysts are concerned the country could be facing another bout of stagflation, the malady that last occurred in the 1970s during the Carter administration, when economic growth stagnated but inflation kept rising.

Such a development would put the Federal Reserve in a bind. The central bank has been cutting interest rates to combat the current slowdown, but if inflation pressures keep rising, it might be forced to stop cutting interest rates for fear that it would make inflation worse.


Copyright © 2018 The Washington Times, LLC. Click here for reprint permission.

The Washington Times Comment Policy

The Washington Times welcomes your comments on Spot.im, our third-party provider. Please read our Comment Policy before commenting.

 

Click to Read More and View Comments

Click to Hide