CONSUMER prices up 0.3 percent in April

Wednesday, May 16th 2001, 12:00 am
By: News On 6

WASHINGTON (AP) _ Consumer inflation rose 0.3 percent in April as gasoline prices posted the biggest gain in seven months and the cost of tobacco increased by the largest amount in a year. Clothing prices, however, took their biggest plunge in 52 years.

The modest advance in the Consumer Price Index, the government's most closely watched inflation gauge, followed a 0.1 percent increase in March, the Labor Department reported Wednesday.

April's CPI was a slightly better reading on inflation at the consumer level than the 0.4 percent increase many analysts were expecting.

Prices for goods other than food and energy products, often called the ``core'' rate of inflation by analysts, rose for in April by 0.2 percent the second month in a row, matching analysts' expectations.

The inflation report came a day after the Federal Reserve slashed interest rates for a fifth time this year. The cuts total 2.5 percentage points and are aimed at boosting economic growth. One of the reasons Fed policy-makers have been able to act so aggressively is because inflation, outside of rising energy prices, has remained tame.

An area of the economy that has held up well during the slowdown is housing. The Commerce Department reported Wednesday that housing construction rose by 1.5 percent in April to a seasonally adjusted annual rate of 1.609 million units, a stronger-than-expected performance, after a 2.3 percent drop in March. Lower mortgage rates are helping to keep the market stable.

While concerned about inflation creep, economists estimate that higher prices for energy and other items are more likely to squeeze companies' profits than be passed along to consumers as higher prices _ a difficult undertaking when the economy is weak.

So far this year, consumer prices are rising at a seasonally adjusted annual rate of 3.8 percent, compared with a 3.4 percent increase for all of last year. The pickup mostly reflects higher energy prices, which have risen because of production limits and strong demand.

In April, energy prices rose 1.8 percent, the biggest gain since January, after falling by 2.1 percent in March.

Gasoline prices jumped by 5 percent, the largest increase since September 2000, when they went up by 6.1 percent.

In recent weeks, the average retail price for gasoline in the United States increased 8.58 cents to $1.76 a gallon, according to the Lundberg Survey of 8,000 service stations nationwide. Motorists in the Midwest and West saw the biggest jumps at the pump.

Prices for-home heating oil and natural gas fell by 2.1 percent and 1.6 percent, respectively. Even with the dip, natural gas prices are higher than they were last year.

Food prices, meanwhile, edged up 0.1 percent in April, following a 0.2 percent gain. Falling prices for pork and vegetables helped blunt rising prices for beef and fruit.

Elsewhere in the report, prices for tobacco products, including cigarettes, rose by 4 percent in April, the largest gain since a 4.4 percent jump in April 2000. Economists say tobacco companies have raised cigarette prices to help cover costs related to legal settlements.

Prices for recreation _ a broad category that includes everything from cable television to sporting goods and pet products _ rose by a record 0.9 percent in April, surpassing the previous all-time-high monthly gain posted in January 1996.

All these increases were tempered somewhat by decreases in other product prices. Clothing prices fell 1.3 percent in April, the biggest drop since a 1.9 percent decline in January 1949. Retailers are cutting prices to lure shoppers into stores. Airline fares declined by 1.3 percent.