Economy Watch: CPI, Food Prices on Rise
- Apr 15, 2011
April 15, 2011
By Dees Stribling, Contributing Editor
The U.S. Consumer Price Index jumped 0.5 percent from February to March, according to the Bureau of Labor Statistics, and was up 2.7 percent compared with March 2010. The monthly increase was twice as much as in both January and February, when the CPI was up 0.5 percent.
Gasoline, as most consumers would expect, was a main culprit in the increase: up 11.7 percent month-over-month and 27.5 percent year-over-year. Food accounted for less of the increase, but still some: food at home was up 1 percent month-over-month, led by rises in meat and egg prices.
The CPI numbers came in the wake of the BLS report on Thursday regarding the U.S. Producer Price Index (PPI) for finished goods–the main gauge of wholesale inflation–which kicked upward 0.7 percent in March. The main driver in the increase was energy prices. In fact, fully 80 percent of the increase can be chalked up to gas prices, but liquefied petroleum gas and home heating oil were also on the inflation bandwagon last month as well.
Not counting energy and food (though we’d stay home and starve without them), the PPI for other kinds of finished goods rose 0.3 percent, led by rising prices for light trucks, though passenger car prices also added to the PPI increase. The March PPI numbers are high, but not as high as in February, when the finished goods PPI spiked 1.6 percent.
Food Prices Hit Global Poor Hardest
The recent spike in food prices isn’t merely an American problem. In fact, according to a report released by the World Bank on Thursday, global food prices are 36 percent above their levels a year ago and remain volatile. The hardest hit around the world are populations that are already poor.
Key price increases compared to a year ago include corn (that is, maize) (up 74 percent), wheat (up 69 percent), soybeans (up 36 percent) and sugar (up 21 percent), although rice prices have been stable. “In many countries, vegetables, meats, fruits and cooking oil continue to rise with potentially adverse nutritional consequences for the poor,” the report noted.
Some 44 million people worldwide have been driven into extreme poverty since last June as a result of food-price spikes. The World Bank’s definition of extreme poverty is living on $1.25 a day, and by that definition some 1.2 billion people worldwide live in extreme poverty. A further 10 percent increase in global prices could drive an additional 10 million people below the line, the organization says.
Federal Fund Set for Fiscal ’11
After all the drama last week about shutting down the federal government, a bill to fund the federal government for the rest of fiscal 2011, until Oct. 1 that is, passed Congress easily on Thursday: 260-167 in the House of Representatives and then 81-19 in the Senate. Members of both parties voted for the bill. Interestingly, the freshman class in the House, which had been braying the loudest about spending cuts before the shutdown drama, generally went along with the measure: 60 out of 87 of them voted for the bill.
But fresh fights lie dead ahead. Next is the debt ceiling. Rather than being compared to a football game or a rugby match, the popular metaphor for the upcoming debt-ceiling quarrel seems to be a game of chicken, and the big loser could be the world economy.
Wall Street started the day on Thursday in the dumps, but eventually climbed out of negative territory (mostly). The Dow Jones Industrial Average gained 14.16 points, or 0.12 percent, while the S&P 500 just about broke even, up 0.01 percent. The Nasdaq lost a trifle, down 0.05 percent.