Inflation pressures ease despite food price jump

WASHINGTON — 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.

The 0.2 percent reading for the overall Consumer Price Index was slightly lower than the 0.3 percent rise that economists had been expecting and the 0.1 percent rise in core inflation was below the 0.2 percent reading that had been expected.

Wall Street pushed higher Wednesday on the surprisingly good inflation readings, with the Dow Jones industrial average up more than 120 points in late-morning trading.

Those better-than-expected performances should ease concerns at the Federal Reserve that the sharp increase in food and energy prices this year would lead to broader inflation problems. However, economists cautioned that the recent surge in oil prices to record levels near $127 per barrel has yet to be felt at the consumer level.

Ian Shepherdson, chief U.S. economist at High Frequency Economics, said that the weak economy was starting to show up in lower prices in some areas. He noted that the price of hotel rooms dropped for a third straight month, falling by 1.9 percent in April, a reflection of cutbacks in business and vacation travel.

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.