Consumer prices up by less than forecast

WASHINGTON (Reuters) - U.S. consumer prices rose 0.3 percent in March, slightly less-than-expected as cheaper clothing helped hold down overall prices despite a modest rebound in energy prices, a Labor Department report on Wednesday showed.

The rise in March prices was less than the 0.4 percent gain that Wall Street economists had forecast. Prices were flat in February. So-called core consumer prices that exclude food and energy were up 0.2 percent - in line with expectations - after also being unchanged in February.

Energy prices gained 1.9 percent in March after declining 0.5 percent in February. Costlier energy has been a major factor in rising concern about potential inflation, but it did not show through strongly in the March data.

Prices for apparel dropped for a second straight month, down 1.3 percent after falling 0.3 percent in February. The department said the March decline was the largest since September 1998, possibly a sign that retailers are being forced to cut prices to lure hard-pressed consumers into stores.

The department said that in the first quarter this year, overall consumer prices rose at a seasonally adjusted annual rate of 3.1 percent, down from the 4.1 percent rise posted for all of 2007. Core prices in the first quarter gained at a 2 percent rate, under the 2.4 percent rise for all of 2007.

(Reporting by Glenn Somerville, editing by Joanne Morrison)

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