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Gas Prices Roughing Up the Recovery |
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| Democrat & Chronicle; Rochester, NY; April 13, 2002 WASHINGTON (AP) -- Sharply higher gasoline costs drove up wholesale prices in March by the largest amount in 14 months. Shoppers, hit by more expensive energy bills, spent modestly on other things. The reports released Friday suggest that the economy is hitting some rough patches on the road from recession to recovery. Though many economists believe the surge in energy prices is temporary and note that oil prices have retreated from recent highs, the run-up helped make consumers less willing to splurge. It also put the squeeze on already fragile companies, whose deep cuts in capital spending were a key reason the country fell into recession. "If the economic recovery were a runner I would say it is starting to jog but is not ready for a sprint," said Tim O'Neill, chief economist at Bank of Montreal. O'Neill didn't view Friday's reports as a sign that the economy was backsliding. "I don't think there's anything to suggest the economy is becoming unglued or that it is getting stuck again," he said. The 1 percent jump in the Labor Department's Producer Price Index, which measures inflation pressures before they reach consumers, followed a 0.2 percent increase in February, and largely reflected a sharp increase in energy prices, especially gasoline. But excluding volatile energy and food prices, the "core" rate of wholesale inflation nudged up just 0.1 percent in March after being flat the month before. That suggests most other prices are remaining well-behaved. For the 12 months ending in March, wholesale prices actually fell 1.4 percent. Sales at the nation's retailers, meanwhile, rose a modest 0.2 percent in March for the second month in a row, the Commerce Department said. While the increase was smaller than analysts expected, it still shows that consumers -- whose spending accounts for two-thirds of all economic activity in the United States -- are out there shopping and aren't clamping their pocketbooks and wallets shut. Consumers bought electronics and appliances, building and garden supplies and sporting goods. They spent more on gasoline. But they cut back spending on cars, home furnishings and clothes, and ate out less often. "The consumer is still buying but the pace is moderate not exuberant," said Joel Naroff of Naroff Economic Advisors. |
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