Here are the highlights:
Gas prices increase again:
Gasoline prices saw another significant increase for the week of April 2, 2007, jumping 9.7 cents to 270.7 cents per gallon. This is the ninth consecutive week of increases; prices are now 11.9 cents per gallon higher than at this time last year. All regions reported higher prices. East Coast prices were up 9.6 cents to 267.1 cents per gallon, while Midwest prices rose 9.6 cents to 261.4 cents per gallon. The Gulf Coast saw the largest regional increase, with prices up 12.3 cents to 256.5 cents per gallon. In the Rocky Mountains, prices increased 8.1 cents to 261.9 cents per gallon. West Coast prices were up 8.0 cents to 309.6 cents per gallon, with the average price for regular grade in California up 7.6 cents to 322.8 cents per gallon, 48.5 cents per gallon above last year's price.
Last year we saw gas prices over $3.00 gallon. If prices stay on the same trajectory, we're in for an ugly summer.
This also increases pressure on the Fed not to lower interest rates.
I am also wondering how CPI will look next month with all of these increases.
ISM is increasing, albeit at a slower pace:
"Non-manufacturing business activity increased for the 48th consecutive month in March," Nieves said. He added, "Business Activity, New Orders and Employment increased at a slower rate in March than in February. The Prices Index increased 9.5 percentage points this month to 63.3 percent
Here's the anecdotal evidence:
* "Overall core business activity is slightly slower." (Finance & Insurance)
* "Constant increases in fuel costs seem to be causing an economic downturn. Outlook remains cautiously optimistic." (Professional, Scientific & Technical Services)
* "Business activity seems to have slowed with some brightness on the horizon." (Wholesale Trade)
* "Market remains stable." (Information)
* "Business is OK but not great. We will not get the price in the market. Making our year depends upon cost control." (Agriculture, Forestry, Fishing & Hunting)
The prices component is troubling:
Prices paid by non-manufacturing organizations for purchased materials and services increased in March for the 46th consecutive month (following the recent seasonal adjustments). ISM's Non-Manufacturing Prices Index for March is 63.3 percent, 9.5 percentage points higher than February's seasonally adjusted index of 53.8 percent. In March, the percentage of respondents reporting higher prices increased by 21 percentage points to 38 percent as compared to February. The percentage indicating no change decreased from 74 percent in February to 58 percent in March. The percentage of respondents noting lower prices decreased from 9 percent in February to 4 percent in March.
Again, like gas prices, this type of news may prevent the Fed from lowering interest rates unless there is a really big slowdown.