Consumer prices rise modest 0.3 percent in March despite jump in gasoline costs

Posted 9:10AM on Tuesday 16th April 2002 ( 23 years ago )

WASHINGTON - Consumer prices rose by a modest 0.3 percent in March despite sharply higher costs for gasoline and other energy products. The advance in the Consumer Price Index, a closely watched inflation gauge, represented a slight pickup from the 0.2 percent increase posted in February, the Labor Department reported Tuesday. The latest CPI report was a better reading on inflation than the 0.5 percent rise many analysts were expecting. Excluding volatile energy and food prices, the "core" rate of inflation moderated a bit in March, rising just 0.1 percent, down from a 0.3 percent increase. That suggested most other prices were remaining well-behaved. In another report, housing construction fell by 7.8 percent in March, the largest decline in two years. But even with the drop, builders began work on 1.65 million units, at an annual rate, a still-robust level. The housing market was one of the few bright spots of the economy during the recession. Many analysts predicted a slowdown but still foresee activity remaining healthy. For the first quarter of this year, consumer prices rose at an annual rate of 3 percent, compared with a 1.6 percent increase for all of 2001. The pickup largely stems from higher energy costs, advanced at a 16.5 percent rate in the first quarter after having fallen steeply in the second half of last year. In March, energy prices shot up 3.8 percent, following a 0.8 percent dip. Gasoline prices went up 8 percent, the largest advance since September. Fuel oil prices rose 2.2 percent, the largest increase since December 2000. Natural gas prices increased 0.8 percent, while electricity prices were flat. Tensions in the Middle East contributed to the rise in oil prices in March. Prices had eased, but jumped again on Monday in response to uncertainties in South America. Oil prices surged as Venezuelan President Hugo Chavez, who had been ousted, returned to power. Traders viewed that as a sign that the country -- the No. 3 oil supplier to the United States-- would stick to a recent policy of limiting production to prop up prices. However, Chavez made conciliatory gestures toward the country's state-run oil company, raising hopes of an end to strikes and disruptions that have choked off supplies from the world's fourth-largest oil exporter. Higher oil prices and stronger demand made it more expensive for motorists to fill up their gas tanks last month. Also contributing to the pickup in consumer inflation in March was a 1.2 percent increase in clothing prices, the largest since August 1998, reflecting the introduction of higher priced spring and summer clothes. Food prices, meanwhile, rose 0.2 percent for the second month in a row. Falling prices for pork and dairy tempered rising prices for vegetables, fruit and beef. Prices for medical care increased 0.4 percent, following a 0.3 percent rise. But there were some bargains for shoppers. New car and truck prices dipped 0.3 percent in March. Computer prices fell 2.9 percent. Telephone charges decreased 1.2 percent, reflecting declines in both local and long-distance. Tobacco prices dropped 3.5 percent. To prop up the economy, the Federal Reserve slashed interest rates 11 times last year. The Fed had plenty of room to act so aggressively because of a long period of well-controlled inflation. Citing evidence of a turnaround, the Fed opted to leave rates alone in January and March. Economists believe the central bank would wait until after May -- at the earliest -- to begin raising rates.

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