Wholesale Prices Up Modest .4% in April : Gasoline Prices Soar; Auto, Food Costs in Decline

Wholesale prices rose a moderate 0.4% in April, despite the sharpest increase in energy costs in nearly 2 1/2 years, the government said today.

The gain in the Labor Department’s producer price index reflected a steep jump in gasoline prices, counterbalanced by a substantial drop in auto prices and broad declines in food costs.

It followed a 0.4% gain in March and back-to-back 1% jumps in January and February.

Because of the steep rises early in the year, wholesale price inflation, one stop short of retail, advanced at a 9% annual rate in the first four months of 1989.

“This is very good news . . . but the inflation watch is not over,” said Dirk Van Dongen, president of the National Assn. of Wholesaler-Distributors. “My concern is it’s dangerous to generalize long-term trends from any 30-day snapshot. We still have some sectors in the economy that are hot even though some have slowed.”

Economists were paying particular attention to the inflation rate for goods other than the volatile food and energy categories, which edged down 0.1% in April after a 0.3% rise in March. It was the first drop since an identical fall in October, 1987.

Biggest Decline Since 1987

A 0.6% decline in food costs was the biggest since a 1.1% decline in December, 1987, and represented the first substantial price relief since last year’s drought.

The huge 7.2% rise in energy costs matched the increase in January, 1987. Energy prices have not risen more sharply in one month in 15 years.

The energy increase was almost entirely attributable to a 13.4% climb in gasoline prices, the steepest since January, 1987. Fuel oil rose a comparatively moderate 0.6% after zooming 16.8% in March. Natural gas prices advanced 1.9%

The decline in food was led by a 15.9% drop in eggs. Vegetables fell 7.5%; pork, 3.6%; fruit, 2.7%, and fish, 1.3%. The prices of turkeys, rice and candy rose.

The biggest drop in categories other than food and energy came in autos, where prices fell 2.8%, the result of manufacturers’ incentives to lure customers into showrooms and revive slumping sales.

There were also declines in children’s clothing, cosmetics, magazines and tires. Prices rose for jewelry and electronic equipment.

Inflation measures earlier in the production process also showed moderation. Intermediate goods rose 0.4% in April after a 0.7% jump in March. Crude goods rose 0.6% after a 2.3% gain.

An example of the three processing levels would be: finished--wholesale bread; intermediate--flour, and crude--wheat.

The 9% annual rate of wholesale inflation so far this year is more than double the 4% price rise last year and four times the 2.2% gain in 1987.

Analysts, however, are divided over whether inflation will continue accelerating later this year.

Michael Boskin, President Bush’s chief economic adviser, acknowledged earlier this week that “we may see another bumpy month or two.” But he pointed out that “the great bulk of the acceleration was due to the increased price of crude oil.”