WASHINGTON (AP) — Americans are paying more for food and gas, a trend that threatens to slow the economy at a crucial time.

So far, the spike in such necessities hasn’t stopped businesses from stepping up hiring or slowed factory production, which rose in March for the ninth straight month. Still, higher gas prices have led some economists to lower their forecasts for growth for the January-March quarter.

Consumer prices rose 0.5 percent last month, the Labor Department said Friday. Nearly all of the gains came from pricier gas and food.

When taking out those two volatile categories, core inflation was relatively flat. But at the same time, employees are only seeing small, if any, pay increases.

“People have less money to spend on goods other than food and energy and that is going to cause the expansion to slow,” said economist Joel Naroff of Naroff Economic Advisors.

The spike in prices is hitting most Americans just as the economy is gaining momentum. Businesses added more than 200,000 jobs in March and February, the best two-month hiring stretch in four years. And the unemployment rate has fallen to a two-year low of 8.8 percent.

Consumers also have a little more money to spend this year, thanks to a one-year cut in Social Security taxes.

But most of the extra $1,000 to $2,000 per person is filling the gas tank. The national average for a gallon was $3.82 on Friday — nearly $1 more than a year ago. In five states, the average price is exceeding $4 a gallon.

How big the economic impact will be is the critical question. Many analysts expect food prices will come down and oil prices will stabilize by summer. If companies continue to create jobs, consumer spending will rise faster. That would give the economy a boost by fall.

U.S. manufacturers are seeing more business, according to a separate report on Friday from the Federal Reserve. Factory output rose in March, bolstered in part by a jump in auto production.

One concern is automakers are bracing for some disruptions in the supply of parts from Japan, which is recovering from a 9.0-magnitude earthquake and tsunami that caused widespread damage.

Nigel Gault, chief U.S. economist at IHS Global Insight, predicts the economy will grow only 1.8 percent in the January-March period, down from an earlier estimate of above 3 percent. Rising inflation will likely cut consumer spending growth to half its pace in the previous quarter.

Still, rising exports and business purchases of computers and other equipment should keep factories humming, even if consumers pull back. And companies will likely keep hiring. For those reasons, Gault expects economic growth to pick up a little in the April-June quarter, and then rebound to nearly 4 percent in the second half of the year.

Oil has soared 28 percent to about $109 a barrel since Middle East turmoil spread to Libya in mid-February. If unrest stops spreading and Americans buy less fuel, oil and gas prices could decline.

Even so, some department stores are not taking chances. Many are cutting their fall orders, concerned that consumers will have less to spend. Kohl’s Inc. is trimming them by more than 10 percent, according to Citigroup Global Markets analyst Deborah Weinswig.

Clothing prices fell 0.5 percent in March, the second straight monthly decline. But prices are expected to rise in the coming months to offset higher labor costs in China and higher cotton costs.

“I think the biggest challenge is not just the price of our…apparel products,” said Blake Jorgensen, chief financial officer of Levi Strauss & Co. during an address to analysts on Tuesday. “It’s trying to understand consumers’ reaction to (all) price increases…. No one’s quite sure as to what the ultimate impact (on) the consumer will be.”

Stagnant wages and salaries make it harder for consumers to pay higher prices, a key reason that Federal Reserve officials think the spike in gas and food will have only a modest and temporary impact on inflation.

According to a separate report Friday, average hourly earnings for all employees, adjusted for inflation, dropped 1 percent in the past 12 months.

Many retailers and other businesses simply can’t pass all their higher costs to their customers.

“The only good news for consumers is that there is terrifically fierce competition among the major discounters like Costco, Target and Wal-Mart,” said Craig Johnson, president of Customer Growth Partners.

Joe Olivo, who owns Perfect Printing Inc., based in Moorestown, N.J., says his suppliers are raising the cost of ink and other items 10 percent this month, the biggest monthly increase he can remember in the 23 years he’s been in business. He’s also paying more for shipping due to fuel surcharges. But so far, he estimates he can only pass on about a third of the higher costs to his clients.

Suppliers “are hinting that there may be more (price increases) down the road,” he said. “That’s really my big concern.”

AP Business Writers Anne D’Innocenzio in New York and Daniel Wagner contributed from Washington to this report.

WASHINGTON (AP) — More people bought previously owned homes in November, the third increase in four months after the worst summer season in more than a decade.

Still, economists say it could take years for home sales to return to healthy levels.

Buyers bought homes at a seasonally adjusted annual rate of 4.68 million, the National Association of Realtors said Wednesday. Even with the rise, this year is shaping up to be the worst for home sales since 1997.

Economists say it could take at least two years or longer to return to a more normal level for sales of around 6 million units a year.

“The housing market is still flat on its back, but there are signs that it is starting to pick itself up,” said Mark Zandi, chief economist at Moody’s Analytics. “Even with the improvements we expect, next year will still be a very weak market.”

The housing market is still struggling to recover from a boom-bust cycle which helped trigger a severe economic recession. Home prices have tumbled in most markets and many potential buyers worry that prices could fall further.

The median price of a home sold in November was $170,600.

Zandi said he expects prices will fall another 5 percent from where they are now, hitting a bottom in the summer of next year.

A major problem is the glut of unsold homes on the market. Those numbers fell to 3.71 million units in November. It would take 9.5 months to clear them off the market at the November sales pace. Most analysts say a six to seven-month supply represents a healthy supply of homes.

Analysts said the situation is much worse when the “shadow inventory” of homes is taken into account. These are homes that are in the early stages of the foreclosure process but have not been put on the market yet for resale.

David Wyss, chief economist at Standard & Poor’s in New York, said when these homes are added, the inventory level would actually be about double where it is now.

“There is a big shadow inventory out there of houses that are in the process of foreclosure or are underwater and will go into foreclosure,” Wyss said. “We are still bouncing along the bottom in housing.”

Patrick Newport, a housing economist at IHS Global Insight, said he believed sales of previously owned homes could actually drop farther in 2011, dipping to 4.6 million units and then begin a gradual recovery in 2012. He said it could take until 2014 for sales to return to around 6 million units.

For November, sales were up in all regions of the country led by an 11.7 percent rise in the West. Sales were up 6.4 percent in the Midwest, 2.9 percent in the South and 2.7 percent in the Northeast.

The November increase was driven by a 6.7 percent rise in sales of single-family homes which pushed activity in this area to an annual rate of 4.15 million units. Sales of condominiums dropped 1.9 percent to a rate of 530,000 units.

C’mon, you’re thinking, you’ve been hearing for months that prices have been more or less stable nationwide. True, but the still-soft job market, the foreclosure crisis, and the absence of incentives such as the homebuyers tax credit will push down the median home price another 5% or so next year, according to Moody’s and Fiserv, before it stabilizes by late 2011 or early 2012.

Individual markets, though, will start diverging from the downtrend by summer. About one-quarter of the nation’s 384 metro areas should see higher prices by year-end, and half will see drops of less than 3%.

Certainly, conditions will favor anyone in the market to buy a new home — or homeowners looking to refinance. Today’s record low mortgage rates, averaging 4.2% for a 30-year fixed term, are expected to remain low at least through the first half of the year.

Even if the economy picks up steam in the latter half of 2011, rates are unlikely to climb higher than 5%, says Amy Crews Cutts, deputy chief economist at Freddie Mac.

[See Why the Housing-Market Recession Isn't Over]

On top of that, assuming that banks can solve their issues with poorly documented foreclosures, home seizures will revert back to record highs, creating competition for sellers and keeping a lid on home values.

The combination of low prices, cheap mortgages, and a slowly improving job market should gradually entice buyers back to the market, setting the stage for prices to stabilize.

Demand, though, won’t be strong enough for values to rise substantially, largely because the weak labor market is depressing new household formation as family and friends opt to live together, and recent graduates return to their childhood bedrooms, says Patrick Newport of IHS Global Insight.

Only about 350,000 households are forming a year, vs. 1.3 million typically. “All you hear about is foreclosures and the supply problem,” says Michael Castleman Sr., CEO of housing research firm Metrostudy. “But the bigger problem is demand.”

[See Why Homeownership Can Still Pay Off]

Wildcards: Foreclosures. If the investigations into robo-signed seizure documents and other issues turn up more problems for banks, foreclosures could be halted indefinitely. That would prop up prices in the short run but weigh them down over the long run.

Jobs. Housing demand could rise if the labor market picks up faster than expected. In that case, prices would firm up earlier in the year.

What to Watch: Signs of an improving market: three straight months of rising sales and a decreasing inventory of homes (a six-month supply is considered healthy; today it’s 11 months). A local agent or realtor’s association can supply you with that data.

Action Plan: Buyers. Don’t try to time the market perfectly. Even if prices fall a bit more in your area, mortgage rates could rise later in the year, offsetting the drop. Initially bid about 10% below what comparable homes have sold for over the past three months; go even lower if the area is rife with foreclosures.

By contrast, if well-priced houses in your desired area are receiving multiple offers — your agent will know — bid close to list price. But don’t engage in a bidding war, says Mark Foreman, senior vice president at Century 21. Plenty more homes will be coming onto the market.

Until your house keys are in hand, don’t change your financial profile don’t buy a car, take a new job, or pay a loan late. Increasingly lenders are re-pulling credit reports and reconfirming jobs just before closing, says Jim Gillespie, president of Coldwell Banker. Any changes could kill the deal.

Action Plan: Sellers. Hang on a few more years until the market recovers. Can’t hold off? Then try to unload fast.

Prices will be falling in most areas for the next several months and, depending on your location, the foreclosure slowdown in place may temporarily reduce your competition, advises Ellen Klein, a realtor in Rockaway, N.J.

Wherever you are, pricing your home right is key. Buyers typically put an upper limit on their search in increments of $25,000 or $50,000. If your house is priced at $365,000, shoppers who cut their search at $350,000 may never see your home.

Best idea: Slightly underprice your house. More often than not you’ll attract numerous buyers who bid up the price, and you’ll end up getting fair value in much less time.

Action Plan: Investors. Assuming foreclosures have slowed where you are, hold off until a few months after they ramp up again. Until then, inventory will be limited, and that will set a floor under prices. When you’re ready to make your move, paying in cash will better the odds of a winning bid, says Foreman.

Action Plan: Owners. One word: refinance — even if you just did it a few years ago, urges Keith Gumbinger of HSH.com, a mortgage information publisher.

If you can shave at least one point off your rate and plan to stay in your home for at least four years, a refi makes sense. On a two-year-old $300,000 loan at 6.5%, refinancing will save you $465 a month and $120,000 in interest.

Or go with a 15-year loan, which averages 3.7%. Your payment will jump $225, but you’ll own your home 13 years earlier and save $253,000 in interest.

Underwater or have little equity? You may be able to refinance through a federal program known as HARP (for details go to makinghomeaffordable.gov). Have funds to spare? A cash-in refi, in which you put in enough to reach 10% or 20% equity, will let you nab those record low rates.