Rising gas costs fuel higher wholesale prices
WASHINGTON – Higher gas costs drove up wholesale prices last month, ending a string of four straight declines.
The producer price index increased 0.2 percent in March, after sharp drops in the two previous months, the Labor Department said. The index measures prices before they reach the consumer.
Excluding the volatile food and energy categories, core prices also rose 0.2 percent.
In the past year, wholesale prices have plummeted 0.8 percent, the sharpest drop in the four years since the government updated its methods for calculating the index. Cheaper gas caused most of the decline. Core prices have risen 0.8 percent in the past 12 months.
If March’s increase is sustained, inflation could move closer to levels that the Federal Reserve believes is consistent with a healthy economy. The government reports consumer prices Friday.
But the strong dollar, which makes imports cheaper, will likely continue to keep a lid on inflation, economists say.
“Inflation remains very soft,” Jennifer Lee, an economist at BMO Capital Markets.
Federal Reserve officials are closely watching measures of inflation as they consider when they will raise the short-term interest rate they control. That rate has been pinned at zero for more than six years.
Fed officials have said they want to be “reasonably confident” that inflation will move closer to its 2 percent goal before they raise rates. Many economists predict the Fed won’t move until September.
The Fed aims for 2 percent inflation to guard against deflation, which can cause a destabilizing drop in prices and wages.
Gas prices fell about 60 percent from last June through January, when they reached a six-year low of $2.03. But they moved up since then. Gas prices averaged $2.39 a gallon nationwide Monday, according to AAA. That’s five cents cheaper than a month earlier.