Energy costs rise, but others ease

WASHINGTON — Energy prices surged in March at the fastest pace since Hurricane Katrina, but other consumer costs eased, providing relief from worries that inflation was getting out of hand.

The Consumer Price Index was up 0.6 percent last month, the biggest jump in 11 months, the Labor Department reported Tuesday. Prices had risen 0.4 percent in February.

The March increase was driven by a 5.9 percent spike in energy costs, the largest gain in this area since September 2005, when Katrina shut down Gulf Coast refineries.

Gasoline prices shot up 10.6 percent with another big increase expected in April given that pump prices have continued to rise. The nationwide average for regular hit $2.88, the Energy Department reported this week, up 71 cents over the past 11 weeks.

But outside of gasoline and other energy products, inflation was well contained in March, the CPI report showed.

Food costs slowed after two months of big gains triggered by crop damage in winter growing areas, while clothing costs plunged by 1 percent, the biggest drop in six years.

The cost of prescription drugs was also down, helping to restrain medical costs, while the cost of hotel rooms fell sharply, helping to dampen housing costs.

Core inflation, which excludes volatile energy and food, posted a tiny 0.1 percent rise last month, the smallest increase in three months.

That was better than the 0.2 percent rise that Wall Street had been expecting and eased fears that this year's jump in energy prices could become embedded in higher prices for other products.

On Wall Street, the Dow Jones industrial average rose 52.58 points to close at 12,773.04, with investors bolstered by the inflation news and good earnings reports.

In other economic news, the Commerce Department reported that construction of new homes and apartments edged up 0.8 percent to a seasonally adjusted annual rate of 1.518 million units in March, reflecting a huge rebound in the Midwest that offset construction declines in the rest of the country.

Activity was heavily influenced by the fact that it was the second warmest March on record. Construction surged 44.5 percent in the Midwest while other regions of the country suffered declines, including a 7.7 percent drop in the West, a 6.1 percent fall in the Northeast and a 2.7 percent decrease in the South.