Inflation pressures ease despite food price jump

[stoker]

WASHINGTON (AP) -- Inflation pressures eased a bit in April despite the biggest jump in food prices in 18 years.
The Labor Department reported Wednesday that consumer prices edged up 0.2 percent last month, compared to a 0.3 percent rise in March.The lower inflation reflected a flat reading for energy, which helped offset a 0.9 percent jump in food costs as prices climbed for many basic items, from bread and milk to coffee and fresh fruits.

The unchanged reading for energy reflected a big 4.8 percent jump in natural gas prices, offset by a 2 percent decline in gasoline costs.

The reported drop in gasoline prices reflected the government's accounting process, which discounts expected seasonal price changes.

Since gasoline prices normally rise significantly in April, the 5.6 percent rise in prices for the month turned into a 2 percent drop after the government adjusted for normal seasonal changes. That was little comfort for motorists now paying record prices at the pump, which are nearing $4 per gallon.

Core inflation, which excludes food and energy, showed prices well behaved in April, rising by just 0.1 percent, compared to a 0.2 percent gain in March.

That reading should ease concerns at the Federal Reserve that the sharp increase in food and energy prices this year would lead to broader inflation problems.

The Fed, fighting against a severe credit crunch and spreading economic weakness, has cut interest rates seven times since last September in an effort to keep the country from toppling into a recession.

However, last month it signaled that it might take a pause in the rate cuts, with some Fed officials expressing worries that further reductions in interest rates could trigger unwanted inflation. The central bank is expected to keep rates unchanged when officials next meet June 24-26.

So far this year, overall inflation is rising at an annual rate of 3 percent, down from a 4.1 percent increase for all of 2007. Core inflation, excluding energy and food, is up at an annual rate of 1.8 percent in the first four months of this year, compared with a 2.4 percent increase for all of 2007.

Even with the slowdown in price increases so far this year, workers' wages are not keeping up. A separate Labor Department report showed that average weekly earnings for nonsupervisory workers dropped by 1 percent in April compared with a year ago, after adjusting for inflation. It was the seventh straight month that inflation-adjusted wages were down compared to a year ago.

The combination of rising food and energy costs, weak wage gains and falling home prices have left households feeling squeezed, with consumer confidence readings plunging to recessionary levels.

While many economists believe the country is in a recession, other analysts contend that the country may be able to avoid a full-blown downturn, especially if consumers spend a sizable portion of the 130 million economic stimulus payments that the government is now sending out.

The rise in food costs was led by a 3.2 percent jump in fresh fruit prices. The cost of bread was up 1.5 percent, 14.1 percent higher than a year ago, while milk prices rose by 0.9 percent, up 13.5 percent from a year ago.

Gasoline prices, even with the decline in April, were 20.9 percent higher than a year ago.

Clothing prices rose by 0.5 percent in April, even though discount stores reportedly engaged in heavy discounting in an effort to spur lagging sales.

New car prices fell by 0.2 percent last month, reflecting the trouble automakers are having with sagging demand in the face of a weak economy and soaring gasoline costs. Airline ticket prices, which had been surging because of more expensive jet fuel, fell by 0.5 percent last month but are still up significantly from a year ago.

What a bunch of shit, more msm prop.


http://biz.yahoo.com/ap/080514/economy.html