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Energy, Egg Costs Push Wholesale Prices Up 0.4% : Economy: Analysts say the March report shows that inflation is not in danger of running out of control.

April 09, 1993|From Times Wire Services

Prices paid to farmers, factories and other producers jumped 0.4% in March, the government said Thursday.

While worrisome, the rise in the Labor Department's producer price index was attributed to special factors, including energy costs and a pre-Easter rise in egg prices. That left the increase in so-called core prices--excluding the volatile food and energy sectors--at only 0.1% in March.

"The (financial) market reaction was very happy because core inflation was up only one-tenth, but I'm less than happy because I do eat and I also drive a car and heat my home," said economist Paul W. Boltz of T. Rowe Price and Associates, a mutual fund company in Baltimore.

Other reports, public and private, show the economy continuing to grow--but slowly. Many major retailers said sales in March were down from a year ago. New claims for unemployment benefits dropped in early April, but less than expected. And businesses said they plan the biggest increase in new equipment and buildings in four years.

U.S. Treasury bonds surged more than a point on the news about unemployment and inflation. Analysts said inflation wasn't in any danger of roaring out of control, but noted that the economy probably has strengthened enough to rule out improvements in inflation.

Producer prices also rose 0.4% in February after a 0.2% increase in January.

Taken together, the first three months of the year represent an annual inflation rate of 3.9%, the highest quarterly rate since the final three months of 1990 and more than double the 1.6% rise for 1992.

Boltz said he expects producer price inflation of about 2% for all of this year and consumer price inflation of about 3.4%, up from 2.9% in 1992.

"Inflation is not dead," he said. "It's not zero. It's a solid 3% and looks to be going up. At 3% inflation, prices double every 24 years. The message here is that the best news on inflation is behind us, but the deterioration will be very gradual."

The Labor Department is scheduled to report today on consumer prices in March.

In other reports Thursday:

* Unsettled weather and shopper uncertainty about taxes and the economy continued to pummel retail sales in March. Many storeowners reported business was down from year-earlier levels, or, like industry leader Wal-Mart Stores Inc., posted meager advances.

* American businesses told the Commerce Department that they plan to increase investment on new buildings and equipment by 6.6%--to $582 billion--this year.

* New claims for unemployment insurance dropped by 9,000 to 369,000 during the week ended April 3, the Labor Department said. However, the drop was only half what economists expected and followed a 31,000 increase the week before.

"When we step back, the basic picture is one of an economy in a sedate advance," said Robert G. Dederick, a bank economist at Northern Trust Co. in Chicago. "Businesses . . . haven't been hiring people, but they've been buying equipment, and that's been a significant support to the expansion."

At the White House, spokesman George Stephanopoulos said the new figures on jobless claims were fresh evidence of the need for President Clinton's $16.3-billion economic stimulus package, now bottled up in the Senate.

"He believes we need a package to create jobs now," Stephanopoulos said. "We're still not doing enough to create jobs in this economy."

March's producer price increase was driven by a 1.3% jump in energy prices on top of a 1.7% gain in February. Gasoline prices rose 2%; heating oil, 8.5%, and natural gas, 1.5%.

Egg prices jumped 12.6% and fish prices 11.3%, the worst since last June. However, fruit prices fell 6.1%, and vegetable prices declined 0.5%.

Over-the-counter drugs fell 1.4%, while new car and tobacco prices rose 0.4%.

Producer Price Index

For finished goods

Seasonally adjusted change from prior month March, '93: +0.4% Feb., '93: +0.4% March, '92: +0.2%

Source: Labor Department

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