Wholesale prices inch up 0.2 percent in March

WASHINGTON (Reuter): A drop in gasoline and heating oil prices limited wholesale prices to a modest rise in March, the government said Tuesday, suggesting inflation is in check for now despite fears in financial markets it is set to accelerate.

The U.S. Labor Department said its Producer Price Index rose 0.2 percent last month after a 0.5 percent jump in February, when bitter cold weather sparked a surge in the price of heating oil and other energy products. A gain in food prices, including those for beef and vegetables, contributed to the March rise.

Excluding the volatile food and energy components, the PPI increased 0.2 percent in March after a 0.1 percent rise in February.

Economists had expected the overall PPI, which measures prices paid by wholesalers, to rise 0.1 percent last month. They expected the so-called "core" rate to advance 0.2 percent.

Government officials and financial markets have been awaiting the producer price report -- as well as Wednesday's release of the Consumer Price Index report -- for more clues about the inflation outlook.

Stock and bond markets -- after having tumbled during the first quarter -- were again battered earlier this month after the government reported that the economy created more new jobs in March than at any time in the past 6-1/2 years.

The increase fanned worries that the economy would overheat and unleash fresh inflation pressures.

Twice

Already, the Federal Reserve has boosted short-term interest rates twice this year to check any inflation buildup by slowing the economy.

The central bank is expected to do so again in the weeks ahead, given the ample evidence that the economy is moving ahead at a brisk pace.

It grew at a seven percent annual rate in the last three months of 1993 -- the quickest pace in 10 years. However, that level is not expected to be sustained in the first quarter of 1994.

The PPI showed energy prices were steady last month after jumping 2.8 percent in February. Heating oil prices, which surged 23.5 percent in February, fell 0.7 percent in March. Gasoline prices fell 1.8 percent after rising 6.3 percent.

Natural gas prices, however, rose 1.9 percent last month, the largest increase on record.

Food prices rose 0.5 percent in March after falling 0.4 percent. Prices of beef, poultry, fish, vegetables and fruit all increased.

In March, the overall index stood at 125.0 over its 1982 base, meaning that a basket of finished goods that cost US$100 in 1982 cost $125.00 last month.