An unexpected surge in wholesale prices last month, the latest in a string of higher price reports, left many economists and investors wondering whether the inflation genie was starting to slip out of the bottle.
Producer prices leaped 0.6 percent in April, the Labor Department reported yesterday. That jump -- the biggest in 2 1/2 years and significantly larger than most forecasters had expected -- unsettled everyone from bond investors to homeowners who hadn't gotten around to refinancing their mortgages and worry that an uptick in inflation could push interest rates higher.
Although bad weather was partly to blame, and the monthly rate probably exaggerates the average increases over a longer stretch of time, the spurt suggested that the sanguine inflation forecasts of the Federal Reserve and the Clinton administration, of 2.5 to 3 percent for the year, could ultimately prove a shade too rosy.
The producer price index has now risen at an annual rate of 4.7 percent so far this year, well above the 1.6 percent increase for 1992. The index measures price changes of all goods produced in the United States -- everything from computers to celery -- and is based on a monthly survey mailed to 87,000 factories and farms.
Since it covers only about 30 percent of economic activity, a rise in the index does not translate into an equal increase in inflation generally.
To some economists, the most eye-catching numbers in the report was the underlying or "core" inflation rate -- the index stripped of volatile food and energy prices. This core number has risen at a 3.4 percent annual rate so far this year, noticeably faster than last year's 2 percent, though merely a fraction of the 12.8 percent increase in 1979, during the high-inflation years.
Administration economists called the numbers disappointing, but, like many analysts, said they were waiting to see today's consumer price index, a broader measure that includes services as well as goods.
Most economic forecasters have predicted a moderate rise of two-tenths or three-tenths of a percent -- in line with what they had expected for producer prices. Although consumer prices generally move roughly in parallel with producer prices, they do not necessarily match each other month by month.
Several special one-time events, including bad weather that pushed up vegetable prices, made things look worse than they likely are. But the fact that analysts have been unpleasantly surprised for several months in a row has made many reluctant to dismiss the report as yet another fluke.
"You can keep saying this is an exception and that's an exception, but pretty soon things add up to a trend," said Tom Tibbetts, who is in charge of the producer price survey at the Bureau of Labor Statistics. "The accumulation of special factors makes it look like inflation is a little warmer this year than last year."
Investors initially reacted to the report yesterday morning by selling bonds and stocks and driving up gold prices, partly because the report --ed hopes of easing by the Fed to bolster the weak economy.
More than one-third of the leap in the producer price index last month can be blamed on bad weather. Because of wet weather in the West and cold in Florida, fruit and vegetable prices zoomed at one of the fastest rates on record, 44.7 percent, as heavy rains washed crops away. Those price are expected to fall.