Prices, Retail Sales Rise; Confidence Falls

Rising gasoline prices sent the producer price index and U.S. retail sales higher in March but likely contributed to a decline in consumer confidence in early April, according to economic reports released Friday.

U.S. retail sales rose 0.2% in March amid higher gas prices and improved demand for sporting goods, music and home improvement supplies. The gain was below economists' expectations for a rise of 0.4%. Stripping out gasoline, sales at stores and restaurants were flat, according to officials at the Commerce Department. A decline in car sales contributed to the weakness in March and sales excluding autos rose a larger 0.4%. Still, that was slightly below estimates for a 0.5% gain.

"These two months mark a sharp slowdown from the frantic three months to January, when core sales rose at a 13% annualized pace," said Ian Shepherdsen, chief economist at High Frequency Economics. "This could not last. Still, we hoped for better in March."

Shepherdsen said an increase in real incomes augurs well for sales, although this report "further eases near-term pressure on the

Fed

."

Retail sales in March were up 3.6% from the same month a year ago.

Separately, the producer price index jumped 1% in March -- the biggest gain in 14 months -- as energy costs soared amid tensions in the Middle East, according to the Labor Department Friday.

Energy prices jumped 5.5% in March, with gasoline prices up 21.3% and heating oil up 19.7%. Food prices rose 0.6%.

Still, the core rate, which excludes the volatile food and energy components, rose just 0.1%, which was in line with expectations. Economists were expecting the headline rate to advance 0.7%.

The PPI was up 0.2% in February, with core prices unchanged. In the first quarter, the PPI rose at a 5.6% annual rate.

Prices of finished goods are down 1.4% over the last year.

While the rise in gas prices boosted the PPI and retail sales in March, it dented consumer confidence in early April, according to the latest report from the University of Michigan,

The preliminary April consumer sentiment index fell to 94.4 from 95.7 in late March. The current conditions index rose to 100.9 from 100.4, while the expectations index fell to 90.2 from 92.7.

Consumers likely were worried about the escalating violence in the Middle East, declines in the stock market and an increase in the jobless rate. Economists were expecting a slight increase to 96.8 in April.