If grocery bills seem higher, you're not imagining things. Thanks mostly to a sharp increase in fuel prices, the cost of food rose faster in February than in any month since November 1974 -- not coincidentally, during a previous energy crisis:Wholesale prices jumped last month by the most in nearly two years due to higher energy costs and the steepest rise in food prices in 36 years. Excluding those volatile categories, inflation was tame.
The Labor Department said Wednesday that the Producer Price Index rose a seasonally adjusted 1.6 percent in February -- double the 0.8 percent rise in the previous month. Outside of food and energy costs, the core index ticked up 0.2 percent, less than January's 0.5 percent rise.
Food prices soared 3.9 percent last month, the biggest gain since November 1974. Most of that increase was due to a sharp rise in vegetable costs, which increased nearly 50 percent. That was the most in almost a year. Meat and dairy products also rose.
Energy prices rose 3.3 percent last month, led by a 3.7 percent increase in gasoline costs.
The good news is that the price of oil has declined after the disaster in Japan, going down to $97 a barrel. However, with Japan's nuclear reactors under scrutiny and the crisis ongoing at their Fukushima Daiichi plant, Japan will need to boost its other sources of electricity. Nuclear power accounts for more than a third of it now. Japan will have to import raw materials for other sources to boost production, and whether that means oil itself or coal, increased transportation demand will eventually mean higher prices even while Japan recovers from the destruction.
Palin called this in November.