04/17 08:53
U.S. March Consumer Prices Rise 0.1%; Core Rises 0.2% (Update1)
By Carlos Torres
Washington, April 17 (Bloomberg) -- U.S. consumer prices rose in March at the slowest pace in seven months, restrained by declining costs for energy, new cars and airline fares, government figures showed.
The consumer price index, the most closely watched gauge of U.S. inflation, rose 0.1 percent last month after a 0.3 percent gain in February, the Labor Department said. The core index, which excludes energy and food, increased 0.2 percent after rising 0.3 percent in February.
Scant signs of inflation make it easier for Federal Reserve policy makers to reduce interest rates, if needed, for a fourth time this year to rejuvenate a sluggish economy, analysts said.
``Inflation will remain very tame going forward and there is little chance the Fed is going to disappoint us in terms of easing,'' said Steven Wieting, economist at Salomon Smith Barney in New York.
The March CPI increase was the smallest since a similar gain in August of last year. Analysts surveyed by Bloomberg News expected overall consumer prices to rise by 0.1 percent and the index excluding food and energy to increase 0.2 percent in March.
A separate report from the Commerce Department showed builders started work on fewer homes in March. Housing starts dropped 1.3 percent to 1.613 million units at an annual pace last month after falling to 1.634 million in February. The declines follow a January pace that was the highest since February 2000.
Inflation This Year
So far this year, the CPI is running at a 4 percent annual rate, compared with a 5.6 percent pace in the same three months last year. The core is running at a 3.5 percent pace, compared with a 2.9 percent rate in the same period last year.
The CPI is the government's broadest gauge of costs for goods and services. About 55 percent of the CPI covers prices consumers pay for services, ranging from medical visits to airline fares and movie tickets. Goods, including food, clothing, autos and appliances, make up the rest.
The Labor Department also said in a separate report that average weekly earnings adjusted for inflation rose 0.7 percent in March after rising 0.1 percent in February.
Until recently, the main inflation threat was a surge in energy prices, which are starting to subside. Energy costs, which account for about a 10th of the CPI, fell 2.1 percent in March, compared with a 0.2 percent decline in February.
Gasoline Costs
The price of gasoline fell 3.8 percent after rising 1.2 percent in February. Consumers paid as little as $1.44 a gallon in March for gasoline at the pump, the lowest since February 2000, according to data from the Department of Energy. Fuel oil prices declined 3 percent and the cost of natural gas dropped 2.1 percent.
New vehicle prices fell 0.3 percent in March, matching February's decrease. Automobile makers continued to use discounts to attract buyers during the month and clear inventories.
Incentives throughout the auto industry averaged $1,462 per vehicle in March, while U.S. automakers' price breaks were higher, led by DaimlerChrysler AG's Chrysler average of $2,068.
Airline fares fell 1.4 percent in March and tobacco costs declined 0.2 percent.
Subdued inflation has made it easier for Fed officials to lower interest rates to stimulate the economy. After the economy grew at a 1 percent pace in the fourth quarter, the slowest in 5 1/2 years, central bankers lowered their benchmark overnight bank lending rate by 1.5 percentage points to 5 percent. The Fed reduced rates twice in January and again in March.
``The inflation rate is still relatively contained and we have that flexibility to engage in the action that we have in January and March,'' Thomas Hoenig, president of the Kansas City Fed Bank, said in a speech last week.
Food Prices
Consumer food prices, which account for almost a fifth of the index, rose 0.2 percent in March after rising 0.5 percent in February. The increase was led by beef, pork, poultry and fresh fruits. Prices of fresh vegetables declined.
The ban on European meat imposed last month by the Department of Agriculture amid concerns over the spread of foot-and-mouth disease is leading to some price increases as beef and pork supplies dwindle.
The price of clothing rose 0.4 in March after rising 0.8 percent in February. The increase reflected the introduction of higher-priced spring and summer wear, the Labor Department said.
Medical care costs rose 0.4 percent in March after rising 0.5 percent the previous month. The March increase was the smallest since a 0.3 percent rise in December of last year.
The cost of personal computers fell 4.4 percent after falling 3.1 percent in February. Palm Inc., the world's largest maker of hand-held personal computers, reduced prices last week after lowering sales forecasts in March. Prices were cut between 9 percent and 14 percent to help trim inventories, which could triple this quarter as sales slowed, the company said.
Housing costs, which represent about one-third of the index and include some energy costs, rose 0.2 percent for a second straight month in March. The cost of shelter rose 0.5 percent after rising 0.4 percent in February.
quote.bloomberg.com
Ibexx |
