Food, Energy, Airlines Push Prices Higher

WASHINGTON (AP) -- Consumer prices pushed higher last month as increases in energy, food and airline tickets overwhelmed the biggest drop in clothing prices in nearly a decade.

The Labor Department reported Wednesday that consumer prices rose 0.3 percent in March after being unchanged in February.

Core inflation, which excludes food and energy, posted a 0.2 percent rise last month. Both the overall increase and the rise in core prices were in line with analysts' expectations.

Over the past 12 months, inflation is up by 4 percent, reflecting relentless gains in energy costs, which are up 17 percent over that period, and food prices, which are up 4.4 percent.

For individual food items, the gains are even more stark, with the price of bread up 14.7 percent over the past year and milk prices up 13.3 percent over the same period.

In other economic news, the Commerce Department reported that construction of new homes and apartments plunged in March to the lowest level in 17 years.

Housing construction dropped by 11.9 percent to a seasonally adjusted annual rate of 947,000 units, a much bigger decline than economists had been forecasting. Building permits also fell in March, signaling more problems ahead for the beleaguered housing industry.

The continued rise in basic items such as gasoline and food have left Americans feeling squeezed, especially at a time when the weak economy is causing rising job layoffs and an unemployment rate that jumped to 5.1 percent in March.

While many economists believe the country has dropped into a recession, the first since 2001, President Bush insists the economy will rebound this summer as 130 million households start spending their economic stimulus checks.

The Federal Reserve has been aggressively cutting interest rates and also shoveling billions of dollars into the banking system in an effort to combat a severe credit crisis. Many economists believe the Fed will cut rates again when policymakers meet at the end of this month.

A separate report showed that higher prices and rising unemployment resulted in falling wages in March. After adjusting for inflation, average weekly earnings for nonsupervisory employees dropped 1 percent last month, compared to the same period a year ago. It was the sixth straight month that inflation-adjusted wages were down.

Democrats, who contend that Americans are getting squeezed between rising energy and food costs and falling home prices and stagnant wages, are pointing to the various economic problems as a reason to elect a Democratic president in November. Bush's approval ratings on his handling of the economy have fallen to a record low for his presidency.

The Consumer Price Index report showed that energy costs jumped 1.9 percent in March, with gasoline prices up 1.3 percent and natural gas prices soaring by an even larger 4.6 percent.

Analysts believe that energy prices will keep rising in the months ahead, reflecting the jump in crude oil costs, which have hit record levels above $114 per barrel.

Food costs rose by 0.2 percent in March, with beef prices up 0.6 percent and vegetable costs up 2 percent.

Airline tickets, reflecting the surge in fuel costs, shot up by 3 percent last month, the biggest jump in six years, while clothing costs fell by 1.3 percent, the biggest one-month drop since September 1998.

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