updated 5/14/2004 1:28:30 PM ET 2004-05-14T17:28:30

Consumer prices rose by a modest 0.2 percent in April — settling down a bit from a large jump the previous month. Still, the government’s latest report on the nation’s pricing climate suggested that inflation is coming out of hibernation.

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The advance in the Consumer Price Index, the government’s most closely watch inflation barometer, followed a sizable 0.5 percent increase in March, the Labor Department reported Friday.

Excluding energy and food prices, the “core” rate of inflation rose by 0.3 percent in April, on top of a 0.4 percent rise the month before. This indicated that while inflation is still considered low, it is clearly awakening from a long slumber.

In the first four months of this year, consumer prices rose at an annual rate of 4.4 percent, compared with a 1.9 percent increase for all of last year. Core prices, meanwhile, also picked up steam. So far this year, they went up at a rate of 3 percent, outpacing the 1.1 percent rise for 2003.

Economists were forecasting a 0.3 percent rise in the overall CPI in April and a 0.2 percent increase in core prices.

In other economic news, the Federal Reserve reported that production at the nation’s factories, mines and utilities rebounded in April, rising by a strong 0.8 percent. The rise, the biggest increase since November, exceeded analysts’ forecasts. In March, industrial activity dipped by 0.1 percent.

The Commerce Department reported that businesses boosted their inventories by 0.7 percent in March, a sign that companies are feeling more confident in the recovery’s staying power. Business sales rose by 2.9 percent in March.

On the inflation front, some companies — which had to keep a lid on price increases during the economic slump — are finding it easier to raise prices now that the economy is rebounding.
Wholesale prices jumped by 0.7 percent in April, the largest increase in a year, the government reported on Thursday.

While recent economic reports show inflation moving higher, Federal Reserve Chairman Alan Greenspan and his colleagues at their meeting last week indicated they are not yet worried. “Long-term inflation expectations appear to have remained well contained,” they said then.

The Fed decided last week to hold short-term interest rates at a 46-year low of 1 percent, unchanged since last June. But the central bank signaled that rates could move higher now that the economic recovery is firmly rooted. Some economists believe the Fed could begin raising rates as soon as its next meeting in June. Others predict a rate increase will come in August or later this year.

Analysts don’t believe inflation now threatens the recovery; but the upward movement in inflation marks a big change in the pricing climate from a year ago. The Fed then was worried about the prospects of deflation, which is a prolonged and widespread price decline.

In April, energy prices rose by 0.1 percent, down from a 1.9 percent spike in March. But some private economists believe energy prices could move higher in the months ahead.

Strong global demand and tensions in the Middle East catapulted oil prices to a record high Thursday on the New York Mercantile Exchange, at $41 a barrel.

Food prices, meanwhile, rose by 0.2 percent in April for the second straight month. Rising prices for beef and veal, dairy products, poultry and fruit swamped falling prices for pork and vegetables.

Elsewhere in the report: airfares prices jumped by 1 percent; medical care costs were up 0.4 percent; and college tuition and fees rose by 0.6 percent. Clothing prices were flat.

Copyright 2004 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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