Inflation leaps up more than expected

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 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.

With the crude oil price rising to a record close of $113.79 per barrel on Tuesday, 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.

The surge in energy and food costs is coming just as unemployment is rising and many economists believe the country has fallen into a recession.

However, 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.

With the economy slowing and inflation rising, some analysts are concerned 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 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.