Wholesale Inflation Slows In April After March Jump

WASHINGTON (AP) -- Inflation at the wholesale level slowed in April following a huge increase in March although prices for a number of items from prescription drugs to pasta shot upward.

The Labor Department reported Tuesday that wholesale inflation increased by 0.2 percent in April following a 1.1 percent jump in March. Outside of food and energy, prices rose by 0.4 percent in April.

The overall moderation in prices primarily reflected how the government adjusts its data to compensate for seasonal changes. Those adjustments showed gasoline prices falling last month even though motorists were seeing prices soar.

The 0.2 percent increase for the department's Producer Price Index was lower than expectations but the 0.4 percent rise excluding food in energy was double what economists had expected.

It left inflation outside of food and energy rising by 3 percent over the past 12 months, the fastest increase for a 12-month period since late 1991.

The report on the PPI, which measures price pressures before they reach consumers, followed news last week that consumer prices rose by just 0.2 percent in April even though food costs soared by the largest amount in 18 years.

At the wholesale level, food prices were unchanged last month after having jumped by 1.2 percent in March. The flat overall reading for food masked wide variations, however. Prices for vegetables dropped by 4.1 percent, while eggs costs were down 12.3 percent, the biggest one-month decline since last June.

However, the cost of rice soared by 17.4 percent, the biggest increase since November 1993, while bakery products were up 1.1 percent.

Energy prices fell by 0.2 percent in April after a 2.9 percent surge in March. The PPI report showed that gasoline costs fell by 4.6 percent. However, that decline reflected the government's seasonal adjustment methods. Since gasoline prices rose less than they usually do in April, that translated into a decline in the government's figures.

That was little comfort for motorists who are now paying record prices with gasoline hitting a new national record of $3.80 per gallon on Tuesday, according to a survey by AAA and the Oil Price Information Service.

The 0.4 percent rise in core inflation, which excludes food and energy, came after a 0.2 percent rise in March. This price acceleration reflected gains in a number of areas such as a 0.7 percent increase in the category that includes prescription and over-the-counter drugs.

Prices for passenger cars rose by 0.4 percent while prices for commercial furniture rose by 1.8 percent, the biggest one-month increase since February 1981.

The increase price pressures are occurring at the same time that the economy has slowed dramatically, increasing worries that the country could be facing another bout of stagflation, the malady that last occurred in the 1970s when successive oil prices shocks sent inflation soaring as growth stagnated.

The Federal Reserve, which has been aggressively fighting the economic weakness and a severe credit crisis with a series of interest rate cuts, signaled in April that it may leave rates unchanged going forward, in part because of worries about inflation.

© 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed. Learn more about our Privacy Policy.


631 SW Commerce Pl. Topeka, Kansas 66615 phone: 785-272-6397 fax: 785-272-1363 email: feedback@wibw.com
Gray Television, Inc. - Copyright © 2002-2014 - Designed by Gray Digital Media - Powered by Clickability 19106364 - wibw.com/a?a=19106364