Consumer Prices Up 0.5%, Nearly Twice Expectation : Inflation: But many economists dismiss the March increase as an aberration.

Consumer prices shot up almost twice as fast in March as most economists had anticipated, posting their biggest increase in 17 months, the Labor Department reported Friday.

But government and private analysts generally dismissed last month’s 0.5% increase in the consumer price index as an aberration in a continuing trend of low inflation, and predicted that prices will moderate again in the months ahead.

In addition, economists said the price report probably will not cause Federal Reserve Board Chairman Alan Greenspan to have second thoughts about the Fed’s decision to cut a key interest rate on Thursday, a move that bolstered sagging stock prices on Wall Street.

“I think Mr. Greenspan and the people advising him are bright enough not to make too much out of one month’s numbers,” said Labor Department economist Patrick Jackman.

Analysts generally agreed that the Fed would not have cut the federal funds rate--the interest that banks charge on the loans they make to one another--unless it was reasonably certain that inflation was well under control.

“The basic story is the trend in inflation is going down,” said Bank of America economist Michael Penzer. With unemployment remaining above 7% and factories running at roughly three-quarters of capacity, Penzer said, there is little likelihood of genuine upward pressure on prices soon.

March’s consumer price increase was broad-based, with food rising by 0.5%, energy by 0.6% and the “core” inflation rate--a less volatile measure that includes everything else--by 0.5%. Even so, Penzer noted that the gains in each category could be explained by forces that are not likely to persist in coming months.

For instance, the food price hike largely reflected a sharp increase in fruit and vegetable costs caused by bad weather in the United States and Mexico. Average prices for tomatoes alone have more than doubled since the beginning of the year.

And while energy prices rose sharply in March, largely in response to higher crude oil costs, the pump price of gasoline has stabilized this month and may begin to decline, Jackman said.

Several analysts said a late Easter is to blame for a delay in the seasonal markdowns that retailers usually make in the prices of goods that range from automobiles to apparel.

“It does look like there are a lot of one-time events that came into those (March) numbers,” said Donald Ratajczak, who heads Georgia State University’s economic forecasting project.

Inflation so far this year is running at a 3.5% yearly rate, which would be slightly higher than the 3.1% recorded in 1991. But that increase did not seem to alarm economists, who noted that last year’s moderate rate reflected a large dip in oil prices in the wake of the Persian Gulf War.

“If we could come in at 3.5%, or anything under 4%, I would look on it as an improvement” in the long-term trend, Jackman said.

Paradoxically, the report of a sharp jump in March consumer prices came only a day after the government reported that wholesale prices had risen by a scant 0.2% during the same month.

Economists say that the divergence merely underscores the difference in the data that go into the two measures. The producer price index of wholesale prices gives much greater weight to commodities and does not include imported food--such as the rapidly escalating tomatoes.

Overall, the consumer price index for urban Americans stood at 139.3, which means they are paying $139.30 for a hypothetical basket of goods that would have cost them $100 between 1982 and 1984. Included in the index are such typical expenses as food, clothing, shelter, fuels, transportation and medical costs.

In a separate report, the Labor Department said that the average weekly earnings of workers declined 0.1% last month, which means they did not keep pace with the rise in inflation.

A Jump in the Consumer Price Index Percent change from prior month, seasonally adjusted: March, 1992: +0.5% February, 1992: +0.3% March, 1991: +0.1%

Source: Labor Department