April 20, 2005
For consumers, gasoline wasn't the only thing that cost them more last month. The government reports its Consumer Price Index surged 0.6% in March, the largest increase in five months.
The report is just the latest evidence that inflation is working its way back into the economy. In addition to energy prices, the cost of food, clothing, airline tickets, and many other essential and non-essential goods and services increased. So far this year, consumer prices are up at an annual rate of 4.3%, compared to 3.3% at this point in 2004.
"Excluding energy, household expenses rose quite sharply and the gains were basically across the board. There were the usual suspects. Medical care and education costs are out of control," said economist Joel Naroff, of Naroff Economic Advisors. "I'm saving as fast as I can, but when my-sixteen-year-old hits college, I will probably still go broke. If tuition doesn't kill me, the inability to afford my medicines will."
Energy costs were up a staggering 7.9% in March, making pulling into the gas pump a painful experience. Overall energy costs were up 4%. Food costs rose by a more moderate 0.2% in March. They were up only 0.1% in February. Prices fell for pork and fresh fruits, helping to moderate price increases for beef, poultry and vegetables.
Naroff says the new inflation report is likely to raise concerns at the Federal Reserve because of the new price pressures outside of the energy sector. The Fed has been raising interest rates at a gradual pace since June of last year, but Naroff suggests the policy makers have been slow to realize the urgency of the price pressures.
"There's a great scene in the television program, "The West Wing", where the president and his advisors sit around asking if anyone knows the price of milk. No one does. Hey members of the Fed, do any of you know the price of milk? Inflation may be tame in your world, but most of us live in a very different environment and the sharp rise in the March Consumer Price Index makes it clear that prices are rising," Naroff said.
