Energy prices boost inflation
Chron.com Energy prices boost inflation
Weekly wages trail rising costs for third straight year
By NELL HENDERSONWashington Post
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WASHINGTON - Surging energy prices pushed consumer inflation to a five-year high in 2005, outpacing average wage gains for most American workers, the Labor Department reported Wednesday.
The department's consumer price index, a widely followed inflation gauge, rose 3.4 percent last year, the fastest rate since 2000, largely reflecting climbing prices for fuel oil, gasoline, natural gas and electricity, the department said.
However, workers' average pay rose more slowly. Average hourly wages fell 0.5 percent and average weekly earnings declined 0.4 percent, after adjusting for inflation, in the 12 months that ended in December, the department said in a separate report.
Last year was the third year in a row in which real weekly wages fell, according to department data for the nation's 92 million private production and nonmanagerial service workers, who account for more than 80 percent of the work force.
"We're just not seeing the improvement in living standards you'd expect" in an economy that is expanding at a healthy pace and benefiting from rapid productivity growth, said Jared Bernstein, senior economist at the Economic Policy Institute, a think tank that focuses on labor issues. "It's the biggest problem in the current economy."
Energy was up 17.1 percent this past year, reflecting gasoline prices that for a time exceeded $3 a gallon and oil prices that approached $70 per barrel.
Overall inflation actually declined by 0.1 percent in December, an unexpectedly good performance, after an even bigger 0.6 percent drop in November.
That represented the first consecutive monthly declines in two years, but both months were heavily influenced by declines in prices in gasoline and other fuels that are expected to be reversed in January.
Substantially lower prices for gasoline in the Houston/Galveston area caused overall prices to dip 1.1 percent in November and December, according to the Bureau of Labor Statistics. Area gasoline prices fell 22.7 percent during that two-month period, offsetting increases in the price of electricity.
At the White House, presidential spokesman Scott McClellan called energy prices "still too high" and said the president was committed to pursuing policies to bring them down.
But Democrats said the earnings decline showed that average American families were falling behind.
In its latest look at regional economic conditions, the Federal Reserve reported Wednesday that the economy was expanding at a moderate pace as the new year began with employment, manufacturing and consumer sales all rising while price increases were described as moderate.
Since June 2004, the Fed has pushed interest rates up 13 times in an effort to make sure that higher energy costs don't become embedded in higher overall inflation as similar oil shocks did in the 1970s.
The survey, based on information collected before Jan. 9 is supplied by the 12 regional Federal Reserve banks. The Dallas district, which includes Houston, said the energy industry "continued to strengthen, although the industry is still cleaning up after the hurricanes." Manufacturing picked up and most real estate markets reported gradual improvement. "Dry weather is straining agricultural conditions, but the 2005 cotton crop was one of the largest ever."
Meanwhile, Wall Street economists were encouraged that the Labor Department's report showed consumer inflation remained tame outside of energy and food prices. So-called core-inflation rose just 2.2 percent last year, suggesting most businesses did not pass their higher energy costs on by raising prices for other goods and services.
"Record high energy prices did not spill over into the rest of the economy," said Nariman Behravesh, chief economist at Global Insight, a financial analysis firm.
The inflation report did nothing to change analysts' expectations that Federal Reserve officials will raise their benchmark short-term interest rate again at their meeting later this month to keep inflation contained.
The Fed is almost certain to nudge the rate to 4.5 percent from 4.25 percent at its Jan. 31 meeting, which will also be Alan Greenspan's last as Fed chairman. And many analysts expect Fed officials to raise the rate at least once more at a subsequent meeting March 28, which probably will be led by White House chief economist Ben Bernanke, who is awaiting Senate confirmation of his nomination to be Greenspan's successor.
Chronicle reporter L.M. Sixel and the Associated Press contributed to this story.
Weekly wages trail rising costs for third straight year
By NELL HENDERSONWashington Post
-->
WASHINGTON - Surging energy prices pushed consumer inflation to a five-year high in 2005, outpacing average wage gains for most American workers, the Labor Department reported Wednesday.
The department's consumer price index, a widely followed inflation gauge, rose 3.4 percent last year, the fastest rate since 2000, largely reflecting climbing prices for fuel oil, gasoline, natural gas and electricity, the department said.
However, workers' average pay rose more slowly. Average hourly wages fell 0.5 percent and average weekly earnings declined 0.4 percent, after adjusting for inflation, in the 12 months that ended in December, the department said in a separate report.
Last year was the third year in a row in which real weekly wages fell, according to department data for the nation's 92 million private production and nonmanagerial service workers, who account for more than 80 percent of the work force.
"We're just not seeing the improvement in living standards you'd expect" in an economy that is expanding at a healthy pace and benefiting from rapid productivity growth, said Jared Bernstein, senior economist at the Economic Policy Institute, a think tank that focuses on labor issues. "It's the biggest problem in the current economy."
Energy was up 17.1 percent this past year, reflecting gasoline prices that for a time exceeded $3 a gallon and oil prices that approached $70 per barrel.
Overall inflation actually declined by 0.1 percent in December, an unexpectedly good performance, after an even bigger 0.6 percent drop in November.
That represented the first consecutive monthly declines in two years, but both months were heavily influenced by declines in prices in gasoline and other fuels that are expected to be reversed in January.
Substantially lower prices for gasoline in the Houston/Galveston area caused overall prices to dip 1.1 percent in November and December, according to the Bureau of Labor Statistics. Area gasoline prices fell 22.7 percent during that two-month period, offsetting increases in the price of electricity.
At the White House, presidential spokesman Scott McClellan called energy prices "still too high" and said the president was committed to pursuing policies to bring them down.
But Democrats said the earnings decline showed that average American families were falling behind.
In its latest look at regional economic conditions, the Federal Reserve reported Wednesday that the economy was expanding at a moderate pace as the new year began with employment, manufacturing and consumer sales all rising while price increases were described as moderate.
Since June 2004, the Fed has pushed interest rates up 13 times in an effort to make sure that higher energy costs don't become embedded in higher overall inflation as similar oil shocks did in the 1970s.
The survey, based on information collected before Jan. 9 is supplied by the 12 regional Federal Reserve banks. The Dallas district, which includes Houston, said the energy industry "continued to strengthen, although the industry is still cleaning up after the hurricanes." Manufacturing picked up and most real estate markets reported gradual improvement. "Dry weather is straining agricultural conditions, but the 2005 cotton crop was one of the largest ever."
Meanwhile, Wall Street economists were encouraged that the Labor Department's report showed consumer inflation remained tame outside of energy and food prices. So-called core-inflation rose just 2.2 percent last year, suggesting most businesses did not pass their higher energy costs on by raising prices for other goods and services.
"Record high energy prices did not spill over into the rest of the economy," said Nariman Behravesh, chief economist at Global Insight, a financial analysis firm.
The inflation report did nothing to change analysts' expectations that Federal Reserve officials will raise their benchmark short-term interest rate again at their meeting later this month to keep inflation contained.
The Fed is almost certain to nudge the rate to 4.5 percent from 4.25 percent at its Jan. 31 meeting, which will also be Alan Greenspan's last as Fed chairman. And many analysts expect Fed officials to raise the rate at least once more at a subsequent meeting March 28, which probably will be led by White House chief economist Ben Bernanke, who is awaiting Senate confirmation of his nomination to be Greenspan's successor.
Chronicle reporter L.M. Sixel and the Associated Press contributed to this story.
posted by Marcel at 7:31 AM
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