Rising Gasoline Costs Fuel 0.5% Consumer Price Surge : Hike Dismissed as Cause for Inflation Fear
Spurting gasoline prices drove consumer costs up 0.5% in March but analysts said the big increase was a one-month phenomenon and no cause for alarm that inflation is reheating.
(Prices in the Los Angeles area rose only 0.2% last month after a 0.4% jump in February, the government said.)
More worrisome to economists on the national front was yet another drop in orders for durable goods, further indication that manufacturing industries are suffering from foreign competition.
The weakness in U.S. manufacturing has been cited as one of the main reasons that overall economic growth was so weak during the first three months of the year, when the economy expanded at 1.3%, the slowest rate since late 1982.
At the White House today, spokesman Larry Speakes said “inflation still appears to be well under control” but added that “prompt, decisive action by Congress in reducing federal spending is essential if we are to maintain the expansion of the U.S. economy.”
Although the increase in the Labor Department’s consumer price index was the most pronounced since January, 1984, analysts noted it was due primarily to a 3.8% jump in the cost of gasoline and other motor fuels coming on the heels of a 2.6% decline in February.
Food and entertainment costs held steady and all of the other major components, except health care, rose by a smaller percentage than they did in February.
Inflation for the first three months of the year--after increases of 0.2% in January and 0.3% in February--is running at an annual rate of 4.1%. It was 4% in all of 1984 and many economists don’t think it will be any higher by the end of 1985.
“There’s really nothing to be concerned with,” Wharton Econometrics’ Rob Wescott said of the consumer price report. “I see this as temporary, a one-month aberration.”
Wescott said a relative abundance of oil on world markets will keep downward pressure on petroleum product prices, including gasoline.
“Gasoline prices give us and gasoline prices take us away,” said John M. Albertine, president of the American Business Conference. “Once gasoline prices level off this spring, the CPI will resume its stodgy pace.”
The Commerce Department’s durable goods report, however, was disturbing because of the pattern it affirmed and the intensity of the decline in orders for non-defense goods.
David Wyss of Data Resources Inc., another forecasting firm, said that indicator overall “is getting very worrying” and the 6.9% drop in non-defense capital goods was “even more scary.” A blip here or there notwithstanding, Wyss noted that such non-military equipment spending has been going downhill since last April.
