updated 4/20/2005 9:55:03 AM ET 2005-04-20T13:55:03

Consumer prices jumped 0.6 percent in March, the biggest inflation surge in five months, as the costs of energy, clothing and airline fares all rose sharply.

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The Labor Department said last month’s increase in the Consumer Price Index, the most closely watched inflation gauge, followed a 0.4 percent rise in February and left consumer inflation rising at an annual rate of 4.3 percent in the first three months of this year. That was a full percentage point above the 3.3 percent rise in prices for all of 2004.

The new report showed that even outside of food and energy, there were significant price pressures last month. The so-called “core” rate of inflation rose by a worrisome 0.4 percent in March — the largest jump in two and a half years and double what economists had expected. It reflected higher prices for clothing, hotel rooms, airline tickets and medical care.

The government’s new report on inflation showed significantly higher price pressures than had been observed in Tuesday’s report on wholesale inflation, which showed a similar overall increase of 0.7 percent, reflecting a sharp jump in energy prices, but only a tiny 0.1 percent increase in prices outside of energy and food.

Economists said the new inflation report was likely to raise worries at the Federal Reserve because of price pressures becoming evident outside of the energy area. The Fed has been raising interest rates at a gradual pace of small quarter-point moves since June of last year.

The higher inflation pressures are coming at a time when a number of reports in recent weeks have shown economic weakness, from a disappointing employment rise in March to lower-than-expected retail sales.

“We are getting slower growth and higher inflation numbers. The Fed is caught,” said David Wyss, chief economist at Standard & Poor’s in New York. “The Fed would like to keep interest rates low to keep the economy moving but on the other hand they have to fight against inflation.”

Wyss predicted that the central bank would raise rates another quarter-point when Fed officials next meet on May 3 and probably continue with quarter-point increases in future months.

Economists and the Federal Reserve track the core inflation figure closely, believing it is a better gauge of underlying inflation pressures since the overall price number can swing widely in response to the volatile energy and food components.

The 0.4 percent rise in the prices outside of food and energy in March followed a 0.3 percent increase in February, which had been the first uptick from four straight months of more moderate 0.2 percent gains in the core inflation rate.

So far this year, the core rate for consumer prices are rising at an annual rate of 3.3 percent in the first three months of the year, the fastest quarterly inflation spurt for core prices since the summer of 2001. For all of last year, core inflation rose by just 2.2 percent.

For March, energy costs shot up 4 percent, the biggest one-month gain since a similar 4 percent rise last October. Gasoline prices climbed 7.9 percent, reflecting the shock motorists have gotten at the pump. There should be a further jump for April given that motorists nationwide are now paying an average of $2.28 per gallon.

Food costs rose by a more moderate 0.2 percent in March, following an even smaller 0.1 percent gain in February. Price declines for pork and fresh fruits helped to moderate price increases for beef, poultry and vegetables.

Outside of energy and food, clothing costs, which had been declining, jumped 0.8 percent in March, the biggest one-month gain in 12 months.

Airline ticket prices rose by 2.7 percent, the largest increase in nearly four years. Airlines have been raising ticket prices to cope with soaring fuel costs.

The costs of hotel and motel rooms shot up 3.9 percent in March, the biggest increase on record.

© 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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