Wholesale Prices Take a Sharp Rise in April : Economy: The government’s report of a 0.6% jump boosts inflation fears. It is the highest hike since the fall of 1990.
Fueling concerns that inflation may be heating up, the Department of Labor reported Wednesday that a key measure of wholesale prices took an unexpectedly high 0.6% jump in April, mainly because of sharp increases in the price of vegetables caused by bad weather in the West.
It was the largest jump in the widely watched producer price index for finished goods since the fall of 1990. Excluding volatile food and energy prices, the core index also rose at an unexpectedly strong rate of 0.4% in April, compared to just 0.1% in March, mainly because of strong price increases in tobacco and passenger cars.
Some economists viewed the surge in the wholesale prices as a harbinger of higher inflation, attributable to a national economy that appears to be getting stronger after a weak first quarter.
To date, wholesale prices have increased at an annual rate of about 4.8%, compared to 1.6% in all of 1992.
“I think it sends a message that the industrial sector is much stronger than what has been reported up to now, as is the economy overall,” said Joseph Carson, chief economist for Dean Witter in New York.
“We’re definitely seeing consumers spend more on big-ticket items. There’s a broadening of the capital spending cycle, and we’re also seeing import prices go up, which gives us a little more pricing flexibility at home as well.”
But others saw the strong increase as an aberration.
“I suspect it sends a false message,” said Robert G. Dederick, chief economist at Northern Trust Co. in Chicago. “If taken at face value, it suggests that inflation is a worsening problem. But if you look at the components, you find it really was the result of a confluence of special factors.”
It’s unclear what effect the higher wholesale prices may have on the April consumer price index to be released today and which economists have been expecting to rise 0.2% to 0.4%. Some economists now expect food prices especially to take a strong jump. But increases in other wholesale prices may take a month or two to appear at the consumer level.
Economists had expected wholesale prices to rise about half as much as they did in April. It was the biggest increase since October, 1990, when the index rose 1%.
The Labor Department said that the bulk of the increase in the producer price index for finished goods came from a 44.7% jump in the index for fresh and dry vegetables.
The increases resulted mainly from torrential rains in Arizona and California, where most of the nation’s vegetables are grown this time of year, economists said. “Prices for lettuce, dry onions, eggplant and green peppers more than doubled from March to April, and tomato prices nearly doubled,” the department reported.
Flooding near Yuma during the winter devastated thousands of acres of iceberg lettuce fields in Arizona, sending prices skyrocketing. That state grows much of the nation’s winter lettuce.
A carton of lettuce, which sold for $3.50 to $5 a year ago, was running as high as $12 and $15 in California, said Ray Borton, senior agricultural economist with the State Department of Food and Agriculture.
“The weather was cool, planting was delayed in a number of areas where it rained, some had to be replanted in some cases. . . . And the price went up accordingly,” he said.
Producer Price Index for Finished Goods
Seasonally adjusted change from prior month:
April, ‘93: +0.6%
March, ‘93: +0.4%
April, ‘92: +0.2%
Source: Labor Department
