Americans got hit with an economic double whammy last month. They had to pay more for gasoline, clothes, airline tickets and a lot of other...

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WASHINGTON — Americans got hit with an economic double whammy last month. They had to pay more for gasoline, clothes, airline tickets and a lot of other products. And their wages did not keep up with inflation.

It was the second month in a row that wages, after adjusting for inflation, fell behind.

The Labor Department reported yesterday that its closely watched Consumer Price Index (CPI) showed prices rising by 0.6 percent in March, the biggest advance since October, as the cost of gasoline and other energy products shot up.

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Even more worrisome, prices outside of the volatile energy and food categories rose by 0.4 percent, double what analysts had expected and the highest increase for so-called core inflation in 2 ½ years.

While inflation climbed, the Labor Department said in a separate report that the average weekly earnings of nonsupervisory workers, after adjusting for inflation, fell by 0.3 in March after having dropped by the same amount in February.

Real weekly earnings had risen by 0.2 percent in both January and December.

The news gave the Dow Jones industrial average another triple-digit loss, where it ended just above the 10,000 mark.

Lagging wages in an environment of rising prices can quickly squeeze consumer spending. If it becomes virulent, it can contribute to a condition called stagflation — when economic growth is flat but inflation is rising.

The U.S. economy has not faced that problem in decades. At present, it is still expanding, thus a distance from stagnating.

Underscoring that inflation pressures are mounting, the Federal Reserve said yesterday in its latest survey of business conditions that “price pressures have intensified in a number of districts, and most report that high or rising energy prices are a concern across sectors.”

The higher prices and the Fed’s report on rising inflation pressures unnerved investors.

The Dow fell 115.05 points to close at 10,012.36, the lowest close since Oct. 28. The Dow is now down 7.15 percent for the year.

The index of 30 actively traded industrial stocks last closed below 10,000 on Oct. 26.

The Standard & Poor’s 500 index also skidded to a fresh six-month low, dropping 15.28 to 1,137.50, its worst close since Nov. 2. The day’s trading brought the S&P’s 2005 loss for the index to 6.14 percent.

The Nasdaq composite index lost 18.60 to 1,913.76, the only major index to remain in positive territory for the week.

Oil futures were volatile, climbing 15 cents to settle at $52.44 on the New York Mercantile Exchange, after the government’s weekly fuel-inventory report showed a decline in crude and gasoline stores. Analysts had expected a build for both.

The Labor Department reported that gasoline prices climbed 7.9 percent last month, the biggest increase since an 8 percent surge in October.

Both times, the increases were driven by soaring global oil prices — a record $55 per barrel in October, a new high of $57 per barrel at the beginning of this month.

While crude-oil prices have retreated recently, gasoline prices are expected to remain above $2 per gallon through the summer driving season.

In the Seattle-Tacoma-Bremerton area, gasoline prices rose 11.7 percent in March. Prices for household electricity climbed 1.6 percent, and grocery prices increased 0.2 percent.

The overall local CPI is reported every other month; the next is in April. Prices in the Seattle area rose 1.3 percent from December to February.

So far this year, inflation at the national consumer level is rising at an annual rate of 4.3 percent, compared with a 3.3 percent increase for all of 2004.

Excluding food and energy, core inflation is rising at an annual rate of 3.3 percent in the first three months of this year, significantly higher than the 2.5 percent increase in 2004.

The Fed has raised interest rates gradually over the past year as a hedge against inflation.

Analysts said the central bank could find itself in the difficult position of choosing to fight slower growth by cutting interest rates, or battling higher inflation with additional rate increases.

The Fed report, which is based on a survey of its 12 regional banks, found rising prices for energy and other commodities are a significant concern across sectors.

Retailers and tourism companies in many regions expressed worry that high energy prices were already dampening business prospects or might soon. Known for the color of its cover, the beige book will be used when Fed policy-makers next meet to set interest rates May 3.

“The Fed is caught,” said David Wyss, chief economist at Standard & Poor’s in New York. “The Fed would like to keep interest rates low to keep the economy moving, but on the other hand they have to fight against inflation.”

Wyss and other analysts said the Fed probably would continue to raise rates by one quarter of a percentage point at its upcoming meetings, though a one-half point jump could happen if energy-driven inflation worsened.

“Energy prices are the key wild card for the economy,” said Mark Zandi, chief economist at Economy.com.

The vice chairman of the Federal Reserve, Roger Ferguson, told reporters in Chapel Hill, N.C., the Fed was wary about emerging price pressures.

“I think it’s very important for us to continue to track pricing developments very closely,” Ferguson said.

For March, energy costs shot up 4 percent, the biggest one-month gain since a similar rise in October. Prices for gasoline, home heating oil and natural gas all increased.

Food costs rose by 0.2 percent in March, following a gain of 0.1 percent in February.

Airline-ticket prices rose by 2.7 percent, the largest increase in nearly four years, reflecting efforts to deal with surging fuel costs.

Health-care costs were up 0.5 percent in March after an increase of 0.6 percent in February.

Seattle Times business reporter Melissa Allison contributed local price information. Information about stagflation and comments from Ferguson were provided by Reuters.