Faculty Opinion Article
By Dr. Peter Morici, Professor of
Rise 0.9 Percent in April
Gasoline Prices Keep Surging
Today, the Labor Department reported
the Producer Price Index increased 0.9
percent in April, thanks to surging
energy prices. The consensus forecast
was 0.8 percent, and my forecast
published by Reuters was 1.0 percent.
Core producer prices producer prices
less food and energy rose 0.1 percent in
April after rising 0.1 percent in March.
The consensus forecast was 0.2 percent,
and my forecast was 0.2 percent.
Gasoline prices surged in April. The
average retail price of gasoline in
April was $2.79 per gallon, up from
$2.47 in March. By May 15, it hit $2.99.
Gas prices are likely to go higher
through the spring and summer driving
season, and significantly burden
Diesel prices are surging too. Diesel
prices rose from $2.56 per gallon in
March to $2.73 in April, and reached
$2.92 on May 15.
Wholesale prices for finished
consumer goods outside the energy sector
rose a modest 0.1 percent in April after
rising only 0.2 percent in March and
falling 0.8 percent in February. These
prices are up only 0.6 percent over the
last 12 months.
Productivity growth remains solid.
These gains have permitted producers of
nonenergy products to absorb higher fuel
prices and wage increases without
pushing up prices for other finished
goods, and to still enjoy increased
The bottom line is that wholesale
price inflation, outside the energy
sector, remains in check, and the
outlook for core consumer prices remains
Tomorrows consumer price data, which
covers a broader range of goods and
services, will further illuminate the
inflation picture and the Feds options.
Equally important will be May jobs
growth and wage data. April jobs growth
was low but wage increases were strong.
Both figures were likely aberrations and
the May figures should reflect a
regression to the mean.
The broader indexes of inflation will
be driven higher by surging petroleum
prices. The Fed will want to make sure
inflation is safely inside the bottle
and the cork is firmly secured. On the
basis of the data we have to date, look
for the Fed to push the Federal Funds
rate to 5.25 percent.
is an economist and professor at the Robert
H. Smith School of Business at the
University of Maryland. He is a recognized
expert on international economics,
industrial policy and macroeconomics. Prior
to joining the university, he served as
director of the Office of Economics at the
U.S. International Trade Commission.