WASHINGTON — 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 reported Tuesday 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 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.
But with the crude oil price rising to a record close of $113.79 per barrel on Tuesday, analysts said consumers should be braced for more bad inflation news to come.
“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. Seven out of 10 Americans now disapprove of Bush’s handling of the economy, an all-time high, according to the latest Washington Post-ABC News poll.
Democrats, hoping to win the White House in November, said the string of bad economic statistics showed how Americans were hurting.
“As the paychecks of middle class families get smaller and their homes lose value, their wallets are being further emptied by the skyrocketing everyday costs of gas and food,” said Sen. Charles Schumer, D-N.Y.
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 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.
For March, energy prices jumped 2.9 percent, the biggest increase since November. The price of gasoline was up 1.3 percent while natural gas rose by 4.2 percent. Home heating oil shot up by 13.1 percent and diesel fuel, used to power the nation’s trucking fleet, increased by 15.3 percent.
Outside of food and energy, the price of soap and detergent jumped 2 percent, the biggest gain in more than two years, while pet food increased by 1.3 percent.
However, the price of new cars dropped by 0.2 percent and the cost of light trucks was down 0.3 percent, indicating the struggles automakers face as a weak economy dampens demand.
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