Wholesale inflation slows in April after March increase

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 Tuesday, 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.

"Firms may not have the pricing power in this soft economy," he said, saying businesses may end up taking a hit to their profit margins because of the higher cost to produce goods rather than being able to pass those costs on to consumers.

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.

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.