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interactive.wsj.com
Energy Prices Fuel Inflation
By Surprisingly Strong 0.7%
An INTERACTIVE JOURNAL News Roundup
WASHINGTON -- Higher energy prices in April propelled U.S. consumer inflation to a faster rate than economists had expected.
See Briefing.com for more information on the Labor Department's report on April consumer prices.
According to the Labor Department Friday, consumer prices last month rose 0.7%, their largest gain in nearly nine years, propelled by a record, 6.1%, surge in energy prices. The gain in the energy component, which included a record 15% advance in gasoline prices, is the sector's largest increase since the government began tracking the data in 1957.
Year-over-year, consumer prices for energy are up 24.5%, according to the Labor Department.
Excluding energy and food, the inflation data reveal a slightly more benign scenario. The core consumer-price index rose 0.4% in April and is up 2.2% year-over-year. For the 12 months ended in April, consumer prices overall were up by a just slightly higher 2.3%.
The inflation numbers are higher than Wall Street anticipated. The median forecast of 16 economists surveyed by Dow Jones Newswires and CNBC called for a 0.4% boost in the consumer prices and a 0.2% rise in the core index.
Last year, weak demand in overseas economies contributed to low prices for energy and other commodities, but a recent agreement by oil-producing nations to reduce production has pushed up prices.
The question of whether energy prices can be sustained is currently under debate as foreign demand remains anemic, but Asia shows signs of recovering from its economic crisis.
Economists have played down the impact of higher oil prices on inflation overall, noting there is little evidence of price pressure in other parts of the economy.
On Thursday the Labor Department said producer prices rose 0.5% in April, which included a 5.1% jump in the energy component. When the volatile energy and food prices were excluded, prices for manufacturers rose only 0.1%.
But the longer energy prices stay up, the greater the chance other prices could rise, too. "I think this is something to watch for, but I'm not panicked yet," said Stephan F. Thurman, deputy chief economist for the U.S. Chamber of Commerce on Thursday.
Though there have been few signs of price pressures in recent months, Federal Reserve Chairman Alan Greenspan last week sparked fears that rapid economic growth could trigger inflation. In a speech in Chicago, he said "prices inevitably will begin to accelerate" if gains in productivity ease or tight labor markets don't slacken.
The recent, well-behaved, pace of inflation, however, was expected to keep the Fed from raising short-term interest rates through 1999, analysts said before the release of Friday's inflation data. The Fed's policy-making committee meets Tuesday.
Outside of energy, price increases were broad-based. Transportation costs rose 2.4% in April, after a 0.7% rise in March. The most recent month's gain is the largest since a 2.5% boost in February 1981.
Consumer-apparel prices rebounded from recent declines, advancing 1.5% after a 0.3% drop in March. Clothing prices haven't increased that rapidly in more than nine years, the government said.
Food prices posted a modest 0.1% increase in April, following a 0.2% drop in March. The rise was caused by a gain in prices for fruits and vegetables, meat, poultry, fish and eggs.
The government's measure of consumer medical-care prices rose 0.4% in April, continuing recent increases in the sector. Housing costs rose 0.4% during April, including a 0.4% gain in shelter prices. Prices for housing have grown three straight months. |
