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Producer Prices Fall, Counter To Predictions

By John S. McClenahen Economists generally thought the U.S. Labor Department's Producer Price Index (PPI) would rise by 0.4% in April, pulled up by higher gasoline prices. But when the data came out last Friday, May 10, they showed an unexpected 0.2% decline. The decrease was led by a drop in consumer food prices, says the Bureau of Labor Statistics. The PPI had increased 1% in March. Prices for consumer foods declined 3.2% in April, with prices for fresh and dry vegetables posting a record decline of 46.5%. In April gasoline prices increased 4.2%, but that was a small fraction of their 21.3% rise in March. The so-called core PPI -- a measure that economists put a lot of stock in because it does not include volatile month-to-month changes in food and energy prices -- rose just 0.1% in April, the same amount as in March. In April, "there was a whiff of inflation in the pipeline as core crude goods [prices] leapt 3.6%," notes Maury Harris, chief U.S. economist at UBS Warburg, New York. "However," he adds, "with commodity prices moving mostly sideways recently, and final demand veering to the soft side, the Fed is not likely to be troubled much by this report."

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