WASHINGTON – Wholesale prices shot up by 1.5 percent in March, reflecting a run-up in energy costs stoked by war tensions and sharply higher prices for cars and clothes.
The big jump in the Producer Price Index, which measures prices paid to factories, farmers and other producers, came on top of a sharp 1 percent surge in February, the Labor Department reported Friday.
The increase in wholesale prices in March was much bigger than the modest 0.3 percent advance economists were predicting and may raise new concerns over whether inflation may be creeping back to life.
A long period of tame inflation has allowed the Federal Reserve to keep interest rates at a 41-year low of 1.25 percent, in a bid to help energize the listless economy.
If the economy were to flash danger signs of sliding into a new recession, Federal Reserve policy-makers wouldn't hesitate to cut rates, economists said. However, Fed Chairman Alan Greenspan and his colleagues are hopeful that if the war in Iraq is quickly and successfully resolved, the economy will get back surer footing.
One of the main factors in the sharp rise in wholesale prices in March was a big, 5.7 percent rise in energy prices. That followed an even sharper 7.4 percent advance in February.
In March, residential natural gas prices soared by a record 15.2 percent, exceeding the previous record rise set in January 2001. Gasoline prices rose 4.6 percent, and home heating oil jumped 13.5 percent.
While war worries contributed to the spike in energy prices, crude-oil prices recently have been retreating, something that should make the inflation picture look better and put less of a strain on the pockets of businesses and consumers, economists say.
Oil prices are now lower, hovering in the $25 to $28 a barrel range on world markets.
Excluding energy and food prices, which can swing widely from month to month, the "core" rate of inflation at the wholesale level rose by 0.7 percent in March, a reversal from the 0.5 percent drop registered in February. The rise in the core inflation rate was much stronger than the flat reading economists were expecting.
One of the major factors in the rise in the core inflation rates was higher prices for automobiles. Prices for light trucks, such as SUVs, rose a record 5.2 percent in March, exceeding the previous all-time monthly high increase of 4.9 percent set in July 1980.
Car prices went up 3.3 percent.
However, excluding automobiles, the core rate of inflation would have shown a flat reading in March.
Food prices, meanwhile, edged up by just 0.1 percent in March, an improvement from February's 0.6 percent rise.