During March, the US economy continued an upward pattern in the prices for common goods. The consumer price index, a key indicator for adjustments in the prices of goods or inflation, rose 0.5% during March, according to statistics [.pdf] released today from the Labor Department. This marks the ninth consecutive month with an increase in the consumer price index, as well as the second consecutive month with a relatively large increase of 0.5%. Similar to January and February, energy and food prices were mostly accountable for the monthly increase.
The energy index, which includes gasoline and utility services, rose 3.5% in March. Even though the energy index has increased nine consecutive months, the last four months alone have brought a 13% increase in the energy index. This escalating trend of energy prices is particularly significant because it increases the operation costs for both consumers and producers.
For instance, the average price for a gallon of gasoline increased in eighteen of the last twenty weeks. During the week ending April 11th, a gallon of gas nationally averaged $3.84, according to the US Energy Administration. This is the greatest price for a gallon of gas since September 2008. The record price for a gallon of gas occurred in July 2008, which was an average of $4.16 per gallon. Since the beginning of October, when a gallon of gas averaged $2.78, the average price per gallon has increased 28%.
Rising gas prices are also reflected in higher production costs. The cost to produce all goods increased for the ninth consecutive month during March, according to the producer price index [.pdf]. With rising costs to produce goods, consumers can expect their buying power to continue to decline. In other words, the pattern for consumers to pay more for the same goods will likely continue so long as production costs are on the rise.
In addition to rising energy prices in March, the food index increased 0.8%. This is the greatest monthly increase in the food index since July 2008 [.pdf] or 33 months ago. Each of the six major grocery store categories increased in March, with increases varying from 0.5% for cereals and bakery goods to 1.9% for fruits and vegetables. More specifically, significant increases in potatoes, tomatoes, and lettuce contributed to a 4.7% rise in fresh vegetables during March.
Excluding food and energy prices, the consumer price index rose 0.1% in March. Airline fares rose higher than the price of any good excluding food and energy, with a 1.9% increase. This marks the seventh consecutive month with an increase in airline fares, which is most likely a result of rising energy prices. Also, prices for new vehicles increased 0.7%, used vehicles increased 0.8%, and medical care commodities increased 0.5%.
As the rising prices of many goods indicate, US consumers are slowly able to purchase less with the same amount of money. Meanwhile, the price for a barrel of oil closed above $110 today. With the absence of a foreseeable conclusion to the turmoil in Libya, elevated energy prices will likely persist. A combination of higher energy prices and production costs will likely lead to similar results for consumer prices in April.