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Food, gas costs push consumer prices higher

Americans paid more for food and gas last month, but outside those volatile categories, inflation remained tame. North Carolina drivers are paying about $1 more per gallon than a year ago.

Posted Updated

By
CHRISTOPHER S. RUGABER
, AP Economics Writer
WASHINGTON — Americans paid more for food and gas last month, but outside those volatile categories, inflation remained tame.

Consumers are spending more, but the steep increase in food and gas prices could limit their ability to purchase discretionary goods and services.

On Friday, drivers paid an average price of $3.75 a gallon in North Carolina, lower than the national average of $3.815 a gallon, according to the travel group AAA.

Raleigh gas prices were at an average of $3.74 a gallon, Fayetteville at $3.78 and Wilmington at $3.76.

Gasoline prices jumped 5.6 percent last month and have risen nearly 28 percent in the past year. Last April, North Carolinians were paying $2.80 for a gallon of gas.

Food prices rose 0.8 percent last month, the largest increase in almost three years. Prices for fruits and vegetables, dairy products, chicken and beef all increased. Coffee costs rose 3.5 percent.

Manufacturers, food processors and other producers are facing higher costs for oil, grains and other commodities. But only some of those increases are reaching the consumer. Many retailers are reluctant to pass on the higher prices for fear of losing price-conscious customers.

Consumers have seen wages and salaries stagnate in the past year, limiting their ability to pay more for many goods. According to a separate government report Friday, average hourly earnings for all employees, adjusted for inflation, dropped 1 percent in the past 12 months.

Stagnant wages are a big reason that most Federal Reserve policymakers say the spike in gas and food will have only a modest and temporary impact on inflation.

"Nothing here to change the Fed's view that the surge in commodity prices can be ignored as long as it doesn't lead to second-round effects in wages and core inflation," said Paul Ashworth, chief U.S. economist at Capital Economics.

Still, pricier food and gas means consumers have less money to spend elsewhere. Consumer spending makes up 70 percent of economic activity. Rising inflation has caused many analysts to reduce their estimates for economic growth in the January-March quarter from roughly 3 percent or higher to as low as 1.5 percent.

The Consumer Price Index rose 0.5 percent in March, the Labor Department said Friday. That matched February's increase, the largest since the recession ended in June 2009. In the past 12 months, the index has increased 2.7 percent, the biggest rise since December 2009.

Excluding the volatile food and gas categories, the so-called core index rose 0.1 percent and it is up only 1.2 percent in the past year.

Separately, the Federal Reserve said U.S. factories produced more consumer goods, business equipment and raw materials in March, boosting manufacturing activity for the ninth straight month. Overall industrial production increased 0.8 percent.

Factory production, the largest single segment of industrial production, increased 0.7 percent last month. Manufacturing has been a key driver of economic growth since the recession ended. That continued last month, even with supply chain disruptions stemming from the crisis in Japan.

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