WASHINGTON — Americans are paying more for food and gas, a trend that threatens to slow the economy at a crucial time.
So far, the spike in such necessities hasn’t stopped businesses from stepping up hiring or slowed factory production, which rose in March for the ninth straight month. Still, higher gas prices have led some economists to lower their forecasts for growth for the January-March quarter.
Consumer prices rose 0.5 percent last month, the Labor Department said Friday. Nearly all of the gains came from pricier gas and food.
When taking out those two volatile categories, core inflation was relatively flat. But at the same time, employees are only seeing small, if any, pay increases.
“People have less money to spend on goods other than food and energy and that is going to cause the expansion to slow,” economist Joel Naroff of Naroff Economic Advisors said.
The spike in prices is hitting most Americans just as the economy is gaining momentum. Businesses added more than 200,000 jobs in March and February, the best two-month hiring stretch in four years. And the unemployment rate has fallen to a two-year low of
8.8 percent.
Consumers also have a little more money to spend this year, thanks to a one-year cut in Social Security taxes.
But most of the extra $1,000 to $2,000 per person is filling the gas tank. The national average for a gallon was $3.82 on Friday — nearly $1 more than a year ago. In five states, the average price is exceeding $4 a gallon.
How big the economic impact will be is the critical question. Many analysts expect food prices will come down and oil prices will stabilize by summer. If companies continue to create jobs, consumer spending will rise faster. That would give the economy a boost by fall.
Oil has soared 28 percent to about $109 a barrel since Middle East turmoil spread to Libya in mid-February. If unrest stops spreading and Americans buy less fuel, oil and gas prices could decline.
Stagnant wages and salaries make it harder for consumers to pay higher prices, a key reason that Federal Reserve officials think the spike in gas and food will have only a modest and temporary impact on inflation.
According to a separate report Friday, average hourly earnings for all employees, adjusted for inflation, dropped 1 percent in the past 12 months.