NYT: Unexpected Surge in Consumer Prices Fans Inflation Fear

[DeepModem Mom]

Unexpected Surge in Consumer Prices Fans Inflation Fear
By EDMUND L. ANDREWS

Published: April 15, 2004


WASHINGTON, April 14 — Consumer prices jumped much more sharply than expected in March, driven by increases for gasoline and clothing. The data reawakened worries about a return to higher inflation and higher interest rates.

The Labor Department reported on Wednesday that consumer prices rose by 0.5 percent in March, which would translate to an annual inflation rate of more than 6 percent if it were sustained. The inflation rate for all of 2003 was only 1.9 percent.

More startling to many economists, the "core" rate of inflation that excludes the volatile categories of energy and food rose at the fastest rate in almost four years....

***

While it is too soon to tell whether the national March inflation pace will continue, the latest data immediately stoked fears in the financial markets that the Federal Reserve would raise short-term interest rates as early as this summer. Nervous selling by bond investors Wednesday sent the yield on the 10-year Treasury note, which is used to set mortgage and corporate borrowing rates, to 4.37 percent, its highest level since November....


http://www.nytimes.com/2004/04/15/business/15ECON.html

[Florida_Geek]

1. In what world do these people live

"Unexpected Surge"

Has any been to a gas station in the last two months? Duhhhhh.... While the index excludes energy... How do you think all those things get to the store shelves, by magic. The cost of gasoline effects that cost of everything we buy.

[RoyGBiv]

2. Need an Explanation

I guess I'm ignorant.

I don't understand how this "core" rate of inflation can be totally divorced from the more volatile energy categories.

I can't think of a single consumer product not affected by energy, or more generically oil prices. Energy is used to transport goods. Energy is used in the wholesale and retail outlets that sell these goods. Oil itself is used in the manufacturing of many of these goods, i.e. plastics. When the price of oil rises, the costs of manufacturing, shipping, and storage rises, thus the retail price rises.

Am I missing something in this equation that makes the core CPI so unexpected given the extreme rise in energy costs lately?

[xchrom]

3. hasn't it been true that manufacturers

didn't build the cost of energy in for a while because consumers and businesses had tightened their belts so much?
perhaps they couldn't ignore it any longer.
any way -- i'm always on a tight budget and it seemed to me as though every thing always got more expensive.

[kalian]

4. Its quite simple really....

its an election year...
people are sheeple and need to be kept "happy" (aka "in the dark")...
mediawhores are the official mouthpiece to the bushistas...

Anymore questions...?