Wholesale inflation continues to pressure the economy.
The Labor Department said its Producer Price Index rose 0.2% in April. That's down from a 1.1% rise in March and below economists' forecasts of a 0.4% jump. However, its core index--excluding food and energy items--climbed 0.4% last month. Analysts had expected 0.2%. The PPI is a leading indicator of where consumer prices will go.
The news pushed Wall Street to a lower opening, and the dollar extended losses against the euro and yen. The euro rose to $1.5660 after the report, from around $1.5645 earlier. The dollar slipped to 103.95 yen, from about 104.10 yen.
Last week, the Labor Department said that the Consumer Price Index jumped 0.2%, a bit less than the 0.3% gain economists had expected. Core CPI, which excludes food and energy costs, was up by 0.1%, also slower than the general expectations for 0.2%. The yield on the benchmark 10-year U.S. Treasury note fell to 3.81%, from 3.83%.
The full brunt of rising oil prices has not been felt by either the electric or natural gas utilities. (See: "Watching Producer Prices") Utilities will be asking regulatory commissions for large rate increases, and those will be reflected in producer and then consumer price data through the fall.
Meanwhile the ethanol program continues to increase prices for corn and competing grains at home and abroad, causing shortages and rationing in developing countries and rising prices for derivative products--flour, baked goods, meat, dairy and processed foods containing corn syrup and soy. President Bush's proposals for non-food-based ethanol derivatives are like General Motors' ads about electric cars. Those benefits, if they ever arrive, are well into the future.
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