Some economists warn that inflation may be back to haunt the economy
The old dragon of inflation -- thought to have been slain -- may be lurking.</br></br>Many economists, including those at the Federal Reserve, aren't worried -- yet. But there have been confusing warning signs in recent weeks. Core inflation, the prices consumers pay for goods and services, excluding food and energy, increased 0.5% in both January and February. Hourly earnings jumped 0.5% in March and are running at a 4% annual rate of increase for the first three months of the year.</br></br>It's a fluke, say Federal Reserve officials, who believe that the economy is too soft to support a round of big price increases. But that view may be rattled tomorrow and Friday, when the Labor Department releases new data on movement on the producer price and consumer price indexes in March. If the numbers show another solid increase in prices, it could incite much more serious worries about inflation.</br></br>Low inflation has been one of the bittersweet benefits of this unusually sluggish recovery. Demand hasn't been strong enough to allow retailers and producers to up the prices of goods. And a weak labor market has kept wages relatively subdued. As a result, consumer prices edged up their smallest amount in six years during 1992.</br></br>But now that the economy is showing signs of firming, some businesses are trying to push through price increases, hoping the market will finally bear it. "Industry sectors are trying to recoup what they gave up in the depth of the downturn," said Mark Steinkrauss, vice president of investor relations for Fruit of the Loom Inc. The company raised prices 5% on a line of T-shirts at the start of the year.