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**forHISglory** · 04-15-2008, 08:57 AM

Wholesale Prices Soar in March

Apr 15, 8:36 AM (ET)

By MARTIN CRUTSINGER
(AP)
WASHINGTON (AP) - Inflation at the wholesale level soared in March at nearly triple the rate that had been expected as the costs of energy and food both climbed rapidly.

The Labor Department reported Tuesday that wholesale prices rose by 1.1 percent last month, the second largest increase in the past 33 years, exceeded only by a 2.6 percent rise last November. Analysts had been expecting a much more moderate 0.4 percent rise in wholesale prices for the month.

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.

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.

The inflation pressures are occurring at a time when the overall economy is slowing and many analysts believe may have toppled into a recession. That raises concerns that the country 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 in an effort to combat the current slowdown. However, if inflation pressures keep rising, it might be forced to stop cutting interest rates for fear that it would make inflation worse.

For March, energy prices jumped 2.9 percent, the biggest increase since November. The price of gasoline was up 1.3 percent while natural gas rose by 4.2 percent. Home heating oil shot up by 13.1 percent and diesel fuel, used to power the nation's trucking fleet, increased by 15.3 percent.

Analysts believe the economy will be hit with more energy pressures in coming months, reflecting the fact that crude oil costs are remaining at record levels above $111 per barrel.

Food costs rose by 1.2 percent in March, reflecting big increases in the price of vegetables, rice, and beef.