Jump in Fuel Costs Pushes Wholesale Prices Up 0.3%

A sharp jump in the costs of gasoline and home heating oil, partly alleviated by the biggest drop in food prices in a year, led to a wholesale price increase of 0.3% in April, the Labor Department said Friday.

The department’s Bureau of Labor Statistics said that, on a seasonally adjusted basis, the April increase in the producer price index works out to an annual wholesale inflation rate of 3.8%.

Over the last 12 months, however, the actual wholesale inflation rate was just 0.7%. From December through April, the annualized inflation rate has been 1.7%.

The producer price index, which measures wholesale price trends, was up just one-tenth of a percentage point more in April than it was in March, when it rose 0.2%. In February, the index decreased by 0.1%.

Bureau of Labor Statistics economist Craig Howells said that, although wholesale prices have risen over the last few months, the inflation rate remains low enough not to worry Wall Street or threaten a more serious inflationary cycle that would undermine the nation’s economy.

Energy costs, fueled by strong increases in the price of both gasoline and home heating oil, jumped 5.8% in April to lead the index’s list of price increases. Prior to April, energy costs had gone down for four straight months.

Gasoline cost 9.5% more after having dropped by 4% over the two previous months. And home heating oil prices soared by 10.2% after falling by 3% since February. The April figures actually reflect March activity.

Howells said that the steep in creases in energy costs are expected to be “a relatively temporary phenomenon.”

He said that American gasoline and heating oil producers gambled that an OPEC oil production limit would crumble, so they cut their reserves; then, when the OPEC limit held, the American companies ran out of supplies and had to scramble to buy more at a higher price, sending demand and prices skyrocketing.

Food prices, on the other hand, declined by 1% in April--the biggest decline since April, 1984, and the fourth month in a row that they have dropped.

Prices for beef, veal, pork, rice and fresh fruits and vegetables all tumbled, but the costs of eggs, fish, candy and gum rose.

Other consumer goods that cost less in April included tires, over-the-counter drugs, home electronic equipment and glassware. All had increased in price during March.

Continuing on a downward trend were prices of leather shoes, kitchenware and electric lamps and bulbs. But prices went up for gold jewelry, rubber footwear, household appliances and plastics.

Capital equipment was unchanged in April, with increases in the costs of aircraft, office machines and commercial furniture offset by decreases in cars, transformers and machine tools.