Prices Paid for Consumer Goods Surged 0.4% in March

Consumer prices surged 0.4% for March, matching the steepest increase in five years, with higher costs for everything from gasoline to food to clothing.

However, retail sales barely increased during the month, government figures released Friday show. That and other reports suggest continued sluggish growth is in store, with only a modest rise in inflation in the months ahead, analysts said.

Stocks and bonds rallied on the news, with the Dow Jones industrial average jumping 45.52 points to 5,532.59. The yield on the benchmark 30-year Treasury bond fell to 6.80% from 6.93% on Thursday.

“We’ve had enough sluggish growth to keep a lid on inflation. I don’t think we have to worry about it,” said Astrid Adolfson, an economist at MCM MoneyWatch in New York.

The Labor Department report says the 0.4% increase in consumer prices matches a January rise and was the biggest one-month jump since a 0.7% increase in October 1990. Consumer prices had risen 0.2% in February.

Energy costs jumped 1.4% in March, the biggest advance since a 1.9% gain in January. It was the fourth straight gain; the prices declined for most of 1995.

Food prices surged by 0.6%, the biggest one-month increase in that component since December 1994.

Excluding the volatile food and energy components, the so-called core rate of inflation was up 0.3%.

For the year so far, inflation at the consumer level has been rising at an annual rate of 4%, far above the 2.5% increase for all of 1995. 1995 was the fourth straight year inflation had been under 3%.

But other reports hint at slow growth and low inflation.

The University of Michigan’s consumer sentiment index weakened in early April, and the Federal Reserve Bank of Atlanta reported that manufacturers based in the Southeast said their nationwide business activity remained sluggish.

In yet another report, the Commerce Department said business inventories barely budged in February, rising just 0.1%, while sales climbed 1.1%.

More important, the Commerce Department reported that the tiny 0.1% increase in retail sales for March follows a revised 1.9% February surge, the biggest gain in three years.

The weakness in March was led by slumping demand at auto dealerships, where sales fell by 0.5% after a big increase in February.

* MARKET REBOUNDS: Stocks emerge from weeklong rut; bonds recover on news of sluggish growth. D2

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Consumer Prices

Percentage change, month to month, seasonally adjusted:

March, 1996: 0.4%

Source: Bureau of Labor Statistics