Consumer Inflation Moderates Slightly
Tuesday May 15, 8:44 am ET
By Martin Crutsinger, AP Economics Writer
Consumer Inflation Moderates Slightly in April Despite Surging Gasoline Prices
WASHINGTON (AP) -- Consumer inflation eased a bit in April even though gasoline prices surged for a second straight month.
Consumer prices rose by 0.4 percent last month following a 0.6 percent jump in March, the Labor Department reported Tuesday. The April increase was slightly lower than expected although gasoline pump prices jumped by 4.7 percent after an even bigger 10.6 percent March advance.
Core inflation, which excludes volatile food and energy costs, edged up just 0.2 percent as falling prices for clothing, airline tickets and tobacco products helped restrain underlying inflation.
The nationwide average price for gasoline has surged to a record $3.07 per gallon, according to the latest Lundberg Survey, surpassing the old mark of $3.03 per gallon set last August.
The big price spike has been blamed on unexpected refinery shut downs that have crimped supplies. Analysts are warning that consumers can expect further price increases.
Through the first four months of this year, consumer inflation is rising at an annual rate of 4.8 percent, almost double the 2.5 percent increase for all of 2006. The acceleration has occurred in large part because of higher costs for food and energy.
However, excluding energy and food, core inflation is up at an annual rate of just 2.2 percent through April, an improvement from the 2.6 percent rise in core prices for all of 2006.
That improvement is certain to be welcomed at the Federal Reserve, where policymakers are hoping that their campaign to restrain inflationary pressures is beginning to show results. After pushing rates up over a two-year period, the Fed has left rates unchanged for the past 11 months, watching to see whether the slowing economy will reduce price pressures.
Energy prices have been rising at an annual rate of 25.3 percent so far this year compared with a gain of 2.9 percent for all of 2006, when a big spike in energy costs in the first part of the year was partially reversed in the fall and early winter.
Food costs, which have been pushed higher by the increased demand for corn to use in ethanol production, were up at an annual rate of 6.7 percent in the first four months of this year compared with a 2.1 percent rise for all of 2006.
For April, food costs rose by 0.4 percent with big increases for beef, poultry and vegetables offsetting declines in the price of pork and fruits.
The 0.2 percent rise in prices excluding food and energy followed a 0.1 percent increase in March. Over the past 12 months, core prices are up 2.3 percent, still above the Fed's preferred comfort zone of 1 percent to 2 percent.
Many economists believe the Fed will keep rates unchanged until core inflation falls further. They believe the slowing economy will bring about lower inflation but not without a rise in unemployment, which they expect will climb from the current 4.5 percent to 5 percent by the end of the year.
The faster pace of inflation so far this year is being felt in workers' paychecks. The Labor Department said that average weekly earnings for non-supervisory workers fell by 0.5 percent in April, compared to March, after adjusting for inflation.
Inflation-adjusted wages were up 0.9 percent in April compared with 12 months ago, the smallest year-over-year gain in eight months.
http://biz.yahoo.com/ap/070515/economy.html?.v=11
I been there - I know.
