WASHINGTON — Inflation rose again last month, reflecting big jumps in the cost of energy and airline tickets. And the forecast is for even bigger energy-related increases to come, including the possibility of $4-per-gallon gasoline by Memorial Day.
Those inflation pressures are occurring just as the economy seems to be sinking into a recession, with consumers cutting back on spending and with the housing industry, where all the troubles started, sinking further.
That was the somber news from a batch of economic reports released Wednesday that depicted an economy still struggling with multiple problems from a prolonged slump in housing, soaring energy prices, a severe credit crisis and rising unemployment.
The Labor Department said consumer prices rose by 0.3 percent in March, after being unchanged in February, as energy prices jumped by 1.9 percent and airline fares, reflecting higher fuel costs, increased 3 percent, the biggest one-month gain in six years.
Food prices, which have been steadily rising for more than a year, were up by 0.2 percent in March and 4.4 percent in the past 12 months. The price of some food staples showed even bigger increases over the past year, including a 14.7 percent rise in the price of bread and a 13.3 percent increase in milk prices.
With crude-oil prices briefly touching a record near $115 per barrel this week, and food prices remaining under pressure because of global shortages, analysts predicted consumers will feel more inflation pressures in the months ahead.
Gasoline prices hit a nationwide record of $3.40 per gallon Wednesday.
“People are going to be paying a lot more for gasoline and groceries in the months ahead,” said Mark Zandi, chief economist at Moody’s . “Nothing is going right at the moment. That is why consumer confidence has fallen to the lowest point since the early 1980s.”
Zandi said the rise in food and fuel prices has been a significant drain on consumers’ purchasing power, another reason he and other analysts believe the country has fallen into a recession. Consumer spending accounts for two-thirds of economic activity.
The Fed also reported Wed nesday that industrial output managed a 0.3 percent rise in March but that the gain in manufacturing was 0.1 percent as auto production continued to fall.
