MercoPress. South Atlantic News Agency

US April wholesale inflation takes short rest in April

United States Producer's Price Index increased 0.2% in April following the big 1.1% jump in March but the improvement is likely to be temporary since during April food prices remained unchanged and energy actually dropped, reported the US Labor Department on Tuesday.

While that was lower than expected, the closely watched core inflation reading, which excludes energy and food, jumped by 0.4%, double what had been expected. Over the past 12 months, core inflation has risen by 3%, the highest reading since 1991. In the last twelve months the IPP has increased 6.5%. Mild April is expected to be followed by strong indexes since price hikes for gasoline, food and a host of other items are forecasted for the coming months. Most worrisome of all, according to analysts are indications that surging energy and food costs were spreading to other parts of the economy, causing more widespread inflation problems. A weak US dollar will also be reflected in higher cost of imports. 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%, the biggest one-month gain in more than 14 years. The cost of pasta, chicken and dairy products also posted big increases. US Agriculture Department on Monday boosted its estimate of how much food costs would rise this year, projecting a gain in the range of 4.5 to 5.5%, approaching levels not seen in the United States since 1990. Wholesale energy prices fell by 0.2% in April after a 2.9% surge in March. The PPI report showed that gasoline costs fell by 4.6% although before adjusting for seasonal factors, wholesale gasoline was up 3.2% last month. Filling up the tank gasoline hit a new US record with regular averaging 3.80 US dollars per gallon on Tuesday. On Wall Street, stocks tumbled as investors grew uneasy about a new record oil price and the bigger-than-expected increase in core wholesale prices. The Dow Jones industrial average fell 199.48 points to close at 12,828.68, its biggest one-day slide since a 206-point drop on May 7. The increasing price pressures are occurring at the same time the US 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.