WASHINGTON — Wholesale prices dipped by 0.2 percent in April, led by the biggest drop in food costs in nearly 28 years. Prices for clothing and light trucks, including SUVs, also fell sharply.
The decline in the Producer Price Index, which measures inflation pressures before they reach consumers, was the biggest in four months and a considerable moderation from the 1 percent jump in March, the Labor Department said.
Excluding volatile food and energy prices, the "core" rate of wholesale inflation nudged up by just 0.1 percent for the second straight month.
The latest PPI reading suggests that prices are remaining well-controlled even as the economy bounces back from recession.
"Overall inflation remains quite benign," said Lynn Reaser, chief economist for Banc of America Capital Management. "Companies selling to consumers and businesses have limited pricing power."
April's PPI performance was better than many analysts were expecting; they were forecasting a 0.3 percent increase in the overall PPI and a 0.2 percent rise in the core inflation rate.
On Wall Street, stocks fell. The Dow Jones industrial average lost 22 points and the Nasdaq index was off 20 in morning trading.
The Federal Reserve — citing uncertainties about the strength of the unfolding economic recovery — decided Tuesday for the third time this year to keep short-term interest rates unchanged.
The Fed said one of the reasons it has the luxury to wait and see how the recovery takes shapes before it begins to boost rates is inflation being under wraps.
In April, prices for all food items fell by 3.2 percent, the biggest decrease since June 1974. Prices for vegetables plunged by a record 46.5 percent. Prices for eggs, fruit, pork, chickens and beef also went down.
A big factor behind the drop in food prices was a steep 86.9 percent decline in the costs of lettuce, Reaser said.
Lettuce prices had skyrocketed as crops in parts of California were hit by bad weather, which reduced supplies. But supplies coming in from other areas helped to drive prices down, Reaser said.
Clothing prices went down 0.7 percent, the biggest decline in nearly 20 years, and costs for light trucks fell 1.4 percent.
Overall wholesale prices also were helped out by moderating energy costs.
Energy prices rose 2.5 percent in April, down from 5.5 percent the month before.
Gasoline prices rose 4.2 percent, reflecting higher crude oil costs and the many blends of gasoline required for clean-air purposes.
Prices at the pump have been increasing substantially since the first of the year, although they have leveled off in recent weeks. The average price of regular gasoline this week was $1.40 a gallon, 31 cents cheaper than at the same time a year ago, according to the Energy Information Administration.
Prices for natural gas were up 3 percent, and heating oil costs rose 8.8 percent. Prices for liquefied petroleum gas, such as propane, increased 10.9 percent.
For the 12 months ending April, wholesale prices fell 2 percent.
Falling prices mean some good deals for consumers. But for companies whose product prices are going down, it means more pressure on already pressed profit margins.
Companies — whose revenues and profits took a hit during the slump — are worried about the recovery's staying power and are reluctant to make big hiring and investment commitments, another factor affecting the strength of the recovery.