April wholesale inflation slows but rising prices kindle worry

Construction workers stack steel forms for the Freedom Tower in New York this week. Core inflation, which excludes energy and food, jumped by 0.4 percent, double what had been expected. (Mark Lennihan/Associated Press)

WASHINGTON - Wholesale inflation slowed in April following a big jump in March, but the improvement is likely to be temporary as consumers are battered in coming months by price hikes for gasoline, food, and a host of other items.

Most worrisome of all, analysts said, were indications that surging energy and food costs were spreading to other parts of the economy, causing more widespread inflation problems.

For April, wholesale inflation was up 0.2 percent, the Labor Department reported yesterday, following a much bigger 1.1 percent jump in March.

While that was lower than expected, the closely watched core inflation reading, which excludes energy and food, jumped by 0.4 percent, double what had been expected.

Over the past 12 months, core inflation has risen by 3 percent, the highest reading in more than 16 years.

The pressures in April came from a number of areas with the price of new cars, toys, and pharmaceutical products all showing increases. Commercial furniture prices jumped by the largest amount in 27 years.

Analysts said some of this is probably reflecting the weaker dollar, which is driving up the cost of imports.

Consumers, already struggling with record higher gasoline prices and rising food bills, could now start to see price increases in these other areas as well, economists said, noting that the price of products at earlier stages of production showed even bigger increases in April.

"We can see a steady spreading of wholesale price increases into the more general economy," said Joel Naroff, chief economist at Naroff Economic Advisors. But he said the weak overall economy, which is flirting with a recession, may restrain the pressures now building up.

For April, food prices were unchanged, reflecting wide cross currents with the price of eggs, and vegetables showing big declines while the price of rice jumped by 17.4 percent, the biggest one-month gain in more than 14 years. The cost of pasta, chicken, and dairy products also posted big increases in the month.

The Agriculture Department on Monday boosted its estimate of how much food costs will rise this year, projecting a gain in the range of 4.5 percent to 5.5 percent, approaching levels not seen in the United States since 1990.

The report on the producer price index, 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.

Wholesale 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 although before adjusting for seasonal factors, wholesale gasoline was up 3.2 percent last month.