WASHINGTON — Soaring food and fuel costs caused wholesale prices to rise much faster than expected last month, raising the possibility of more sticker shock for consumers and more inflationary pressure for the nation's economy.
The producer price index jumped 1.1% in March from February -- nearly triple the 0.4% increase that analysts expected, the Labor Department reported Tuesday. Over the last 12 months, the index was up 6.9%, led by a 20% leap in energy prices and a 5.8% increase for food.
"Core" producer prices, which exclude food and energy, rose only a modest 0.2% in March. But that's small comfort for consumers whose household budgets have been stretched by the rising costs of driving and eating.
"As a consumer, I can't ignore food and energy," said Ken Matheny, an economist with Macroeconomic Advisers, a St. Louis forecasting firm.
However, increases in wholesale prices don't necessarily translate into comparable rises in consumer prices. The Labor Department is due to release its consumer price index for March today.
The run-up in energy prices reflects a continuing ascent in the price of crude oil, which topped $114 a barrel in futures trading Tuesday. That is taking its toll in car-dependent Southern California, where a gallon of self-serve regular gasoline averaged $3.78 at the pump Tuesday, up 15% from a year ago, according to research firm Oil Price Information Service.
Rising food prices, meanwhile, can be traced straight back to the farm.
"We are seeing 25 years of agriculture inflation in six months," said Geoffrey Vanden Heuvel, a Chino dairy farmer.
On Tuesday, Vanden Heuvel said he paid $238 a ton -- 42% more than a year ago -- for hay to feed his 1,400 dairy cows.
Ray Souza, a Turlock, Calif., dairy farmer, said the only reason he was in the black was that last year he signed contracts for a year's supply of feed corn for his 700 dairy cows at $170 a ton -- about $100 a ton less than the current rate. But he's worried about what will happen when his contract runs out in October.
"There are high prices for milk right now, but we already have almost no profit margin," Souza said.
The surging feed costs paid by partly reflect the planting of thousands of acres of prime California agricultural land with high-value crops such as grapes and almonds instead of hay.
