Have sustained high crude oil prices started to reverberate throughout the US economy? Analysts and observers who loudly proclaimed a year ago that the economy was absorbing rising petroleum and product prices aren't saying the same thing this spring.
The latest Consumer Price Index from the Department of Labor's Bureau of Labor Statistics (BLS) is one indication of the situation. BLS reported that the index climbed 0.4% during February on a seasonally adjusted basis from January's level. February's CPI finished an unadjusted 3% higher year-to-year.
BLS said that the energy index, which had substantially declined during December and January, "increased 2% in February, accounting for virtually all the acceleration" in the overall index. "Within energy, the index for petroleum-based energy increased 3.1% in February, and the index for energy services rose 0.8%," it said.
Economic observers focus on the CPI numbers that exclude food and energy because the two sectors are more volatile. But one other CPI segment also reflected the impact of continued high petroleum prices in February.
Impact on transportation
The transportation index, which had declined the previous 2 months, rose 0.8% in February, reflecting a 3.2% increase in the motor fuel index.
"Gasoline prices, which had declined in 6 of the last 7 months, rose 5% to a level 5.4% below their peak level in June 2004," BLS said.
"The index for public transportation turned up in February as a 1.5% increase in airline fares more than offset a decline in the index for other intercity transportation," it added.
Within the Department of Labor's Producer Price Index (PPI), energy also climbed during February (by 1.4%) following declines the previous 2 months. "Leading this upturn, gasoline prices increased 5.2% following a 4.2% decline in January," BLS said. That contributed substantially to a 1.4% rise in the PPI during the month.
Price peak
At at the Department of Energy, the Energy Information Administration has predicted that the nationwide average retail price for regular unleaded gasoline should peak around $2.15/gal during May.
Will the prospect of a price above $2/gal for most of the summer driving season affect vacation travel?
The Travel Industry Association of America's Travel Sentiment Index—an indication of consumers' attitudes about pleasure trips—showed a moderate increase in during the first quarter, up 2.5% from 2004's final 3 months. Among the index's five components, the association said that "the ability to travel based on personal finances" index increased the most (6.7%) from the previous quarter.
"Rising demand has caused a corresponding increase in travel prices, but the good news is that travelers are still relatively positive about the cost of travel products and services," said Suzanne Cook, the group's senior vice-president of research.
The results, released on Mar. 18, were from interviews of 1,000 adults during Jan. 20-30.
