WASHINGTON — Wholesale prices shot up in March, but excluding volatile energy and food prices, all other prices were flat, the Labor Department said Friday in a report that suggested that inflation was not spreading throughout a wider range of goods in the economy.
In other economic news, the U.S. trade deficit narrowed for the second straight month, helped by a sharp drop in oil imports. And rising gasoline prices and troubles in the housing market knocked consumer sentiment to its lowest level in eight months this month, according to another report.
The 1% increase in the producer price index, which measures the cost of goods before they reach stores shelves, came after a 1.3% rise in February. The flat reading on "core" prices, excluding food and energy, marked an improvement from a 0.4% increase the previous month.
The pickup in overall wholesale inflation was higher than the 0.7% increase economists were expecting. On the other hand, the flat reading on core prices was lower. Analysts were forecasting a 0.2% rise there.
"Food and energy costs are surging, but if you don't have to eat and drive, life is not that bad," quipped Joel Naroff, president of Naroff Economic Advisors.
"This was a pretty good report, if you are a central banker," he added. "If you live in the real world, it was not pleasant news."
From the Federal Reserve's perspective, the biggest risk facing the economy is that inflation doesn't recede as policymakers expect. Although the Fed watches a variety of inflation barometers, it is especially interested in the behavior of core prices.
The good behavior of core prices in March suggested that inflation was not in danger of spreading throughout the economy. It also suggested that companies were acting with restraint in passing along their higher fuel costs in the prices they charged wholesalers.
Wholesale energy prices rose 3.6% in March, the most since November. Gasoline prices shot up 8.7%, also the highest since November. Residential natural gas prices increased 3.3%. Diesel fuel prices jumped 8.8%. Prices for liquefied petroleum gas, such as propane, went up 6.5%.
Businesses and consumers might see some relief from rising gasoline prices.
The Energy Department said Tuesday that the recent sharp rise in gasoline costs was likely to slow in the coming weeks, with prices averaging $2.81 a gallon over the vacation driving season, about 3 cents lower than last spring and summer.
