By Chris Cermak

WASHINGTON (MNI) – A moderation in gasoline price gains should have
eased the pace of U.S. inflation in March, according to consensus
estimates ahead of the Bureau of Labor Statistic’s releases of producer
and consumer prices this week.

MNI’s survey of economists forecasts headline PPI and CPI rose 0.3%
last month, which would be down slightly from 0.4% for both indexes in
February.

Already-high U.S. gasoline prices rose more moderately last month,
from $3.849 per gallon on March 5 to $3.996 on April 2, according to
Energy Information Administration data, but that compares to a stronger
rise from $3.50 on Jan. 30.

Petroleum import prices rose at a strong pace of 4.3% in March,
driving headline import prices up 1.3% according to Labor Department
data Wednesday morning. Yet Jacob Oubina, senior economist with RBC
Capital Markets, says seasonal adjustments in March and moving into the
summer should bite into the energy gains in the producer and consumer
indices.

“The seasonal hurdle for the energy component is actually pretty
high,” Oubina told MNI. RBC is forecasting a 0.1% decline in produce
prices.

Oubina also suggested the recent shift to a more downcast global
economic outlook could begin to pull down gasoline prices, despite
recent major inventory draws that have signalled limited supply.

The EIA Tuesday said it expects gasoline to peak at $4.01 in May
and remain close to $4 per gallon through the summer, though it also
reported a much larger than expected draw in gasoline stocks Wednesday
of 4.3 million barrels.

Core prices for both CPI and PPI are forecast to increase 0.2%,
according to MNI’s survey. Core PPI added 0.2% and CPI was up only 0.1%
in February, pushing the year-over-year CPI increase down to 2.2% from
2.3%.

Manufacturing price gains appeared to be relatively steady in
March. The Institute for Supply Management’s manufacturing survey showed
its prices paid index at 61.0, down slightly from 61.5 in February. The
ISM non-manufacturing survey showed price gains easing more drastically,
down 4.5 points to 63.9 in March.

Federal Reserve officials have continued to show little concern
that inflation is gaining momentum, with most noting they expect
headline price gains from energy to be temporary.

The Fed’s Beige Book Wednesday said “overall inflation was modest”
though March, though it also noted that “contacts in many Districts
commented on rising transportation costs due to higher fuel prices.”

Economists at Credit Suisse have forecast some upward pressure on
core prices could come from the auto sector. MNI’s Reality Check
Wednesday reported used car prices have been surging recently, due to
supply shortages. Compact and hybrid models have seen the biggest
increases given the recent gas price hikes.

PPI will be released Thursday at 8:30 a.m. ET and CPI will be
released Friday 8:30 am, both by the Labor Department.

— Chris Cermak is a Washington reporter for Need to Know News

** MNI Washington Bureau: 202-371-2121 **

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