Food and gas costs push consumer prices higher

WASHINGTON – Americans paid more for food and gas last month, but outside those volatile categories inflation remained tame.

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.

But steep food and gas prices are hitting consumers hard.

Gasoline jumped 5.6 percent last month and has risen nearly 28 percent in the past year. Consumers paid an average price of $3.81 a gallon nationwide on Friday according to the travel group AAA.

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.

Still, pricier food and gas means consumers have less money to spend elsewhere, a trend that could slow the economy. 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.