Reports Calm Fear of Inflation Sprawling Across the Economy; Producers Weather the Pain Of Rocketing Energy Prices; Housing Sector Stays Cool
U.S. producers absorbed some of the pain of higher energy prices in April, and the housing market showed further signs of cooling, helping to quell fears inflation will spread to the broader economy.</br></br>Wholesale prices of finished energy goods such as gasoline rose 4% in April, pushing up average prices on all finished goods -- everything from turkeys to tractors -- a greater-than-expected 0.9%, the Labor Department reported. But the closely watched "core" index of producer prices, which excludes energy and food, rose only 0.1%, well below expectations.</br></br>"Given all the energy-price hikes coming through, that's still very subdued," said Nigel Gault, U.S. economist at consultancy Global Insight.</br></br>Economists and investors watch wholesale prices closely as a signal of what may happen with the consumer-price index, a broader measure of inflation on which the government will report today. The two don't correlate closely from month to month, but producer prices do give some indication of what is coming in consumer prices.</br></br>In recent weeks, various indicators have pointed toward gathering inflation pressures, raising concerns that the Federal Reserve will have to extend its 23-month string of interest-rate increases. Also, the economy appears to have been running a lot hotter in the first quarter than initially believed. The Bureau of Economic Analysis reported last month that real gross domestic product -- the value of the nation's output, adjusted for inflation -- grew at an annual rate of 4.8% in the January-March period. But some now expect the government to revise its estimate of first-quarter GDP growth a full percentage point higher.