WASHINGTON Inflation at the wholesale level soared in March at nearly triple the rate that had been forecast as energy prices kept rising and food costs posted a much bigger jump than anticipated, the Labor Department reported Tuesday.
Energy traders, meanwhile, rewrote the record books again Tuesday, pushing oil futures past $114 a barrel as gasoline and diesel prices struck new highs of their own at the pump.
The Labor Department reported that wholesale prices rose by 1.1 percent last month, the largest increase since a 2.6 percent rise last November. The November gain in the Producer Price Index was the biggest one-month jump in 33 years.
Analysts had expected a much more moderate 0.4 percent rise in wholesale prices for the month. However, food costs, which had fallen by 0.5 percent in February, leapt by 1.2 percent last month, propelled upward by big gains in vegetables and beef and the biggest increase in rice prices in more than five years. Those were far higher increases in food prices than expected.
Core inflation, which excludes energy and food, was better behaved last month, rising by just 0.2 percent, down from a worrisome 0.5 percent rise in February.
But with crude oil prices rising, analysts said consumers should be braced for more bad inflation news to come.
"Wholesale prices are rising, and the consumer should expect more shocks at the supermarket and the gas station," said Joel Naroff, chief economist at Naroff Economic Advisors.
Light, sweet crude for May delivery jumped as high as $114.08 a barrel shortly after regular trading ended Tuesday on the New York Mercantile Exchange. That is nearly $2 above an intraday high set last week.
Concerns about insufficient global supply, stoked by a high-profile report by the International Energy Agency that said Russian oil production dropped this year for the first time in a decade, was largely responsible for the surge. Oil prices rose as high as $113.99 a barrel during the regular session before settling at $113.79, up $2.03 from Monday's record close of $111.76 a barrel.
Prices at the pump also charged ahead. Retail gasoline prices rose to a new average national record of $3.386, according to AAA and the Oil Price Information Service. Prices were highest in California, where mid-range and higher grades are now averaging more than $4 a gallon.
Diesel prices at the pump jumped to $4.119 a gallon, also a record, setting the stage for even higher prices on food and other goods transported by truck, ship and rail.
Prices are widely expected to keep rising as summer approaches. Gasoline futures jumped by nearly 6 cents to finish at a settlement record of $2.881. That is less than a nickel below the all-time intraday high for the benchmark contract that was set as Hurricane Katrina made landfall in 2005.
Oil's recent run above $100 a barrel has been largely attributed to a steadily depreciating dollar, because the weakness prompts investors to seek a safe haven in hard commodities such as oil and gold. The greenback strengthened marginally against the euro Tuesday afternoon, but still remains near all-time lows against the 15-nation currency.
The surge in energy and food costs is coming just as unemployment is rising and many economists believe the nation has fallen into a recession, developments that have taken a toll on President Bush's approval ratings. Seven out of 10 Americans now disapprove of Bush's handling of the economy, an all-time high, according to the latest Washington Post-ABC News poll.
Democrats, hoping to win the White House in November, said the string of bad economic statistics showed how Americans were hurting.
"As the paychecks of middle class families get smaller and their homes lose value, their wallets are being further emptied by the skyrocketing everyday costs of gas and food," said Sen. Charles Schumer, D-N.Y.
On Wall Street, stocks climbed higher as investors were encouraged by a report showing a modest rebound in manufacturing in the New York region. The Dow Jones industrial average rose 60.41 points to close at 12,362.47.
For the past 12 months, wholesale prices are up by 6.9 percent and core inflation is up by 2.7 percent, the biggest year-over-year increase in nearly two years.
With the economy slowing and inflation rising, some analysts are concerned the nation could be facing another bout of stagflation, the malady that last occurred in the 1970s, when economic growth stagnated but inflation kept rising.
Such a development would put the Federal Reserve in a bind. The central bank has been cutting interest rates to combat the current slowdown, but if inflation pressures keep rising, it might be forced to stop cutting interest rates for fear that it would make inflation worse.