WASHINGTON -- Consumer prices and retail sales jumped in April, the government said yesterday in a pair of reports suggesting that the economy is gaining strength even as they rekindled fears of inflation.
Those fears jolted the financial markets. The Dow Jones industrial average was left with its biggest loss in six weeks, closing down 34.32 points.
The markets were roiled by a Labor Department report that the prices consumers pay for goods and services jumped 0.4 percent in April, their largest increase in three months.
The Commerce Department, meanwhile, said retail sales rebounded 1.2 percent from a steep, weather-related decline in March. The retail sales increase, to a seasonally adjusted $169.7 billion, was the best in six months.
The reports came a day after the government announced that prices at the wholesale level in April shot up at their fastest pace in 2 1/2 years.
"A lot of people have been talking about all of these [inflationary] blips on the screen for months; we are at the point now where there is reason to be concerned," said Daryl Delano, senior economist for Cahners Economics in Newton, Mass. "We've had quite a run-up in prices."
With continued high unemployment, slumping real estate markets and moderating medical costs from Maine to California, many economists thought this year would be nearly a carbon copy of 1990-1991, when the recession kept overall price increases down to a paltry 3 percent.
The outlook for low U.S. inflation was buttressed by similar trends overseas: Germany's central bank has been reducing key interest rates and in Japan, bargain-hunting buyers hold sway over slumping real estate and retail markets.
What's more, added John Tuccillo, chief economist for the National Association of Realtors, there was little evidence that pessimistic consumers have changed. "If people can't feel or see an economic recovery, then it doesn't exist," he said.
But economists now say evidence is growing stronger that the economy is strengthening and that the inflation rate will rise half a percentage point or so to between 3 percent and 3.5 percent -- slightly higher than earlier predictions.
The rise in consumer prices, the worst since January, partly reflected the effect of West Coast rains on vegetable crops. But even excluding the volatile food and energy categories, prices rose 0.4 percent, the Labor Department said.
In advance of the report, many analysts expected an increase of just 0.2 percent. The surprising 0.4 percent jump came a day after the department said prices paid by wholesalers rose 0.6 percent in April, the biggest increase in 2 1/2 years.
For the first four months of this year, inflation was rising at a 4.3 percent seasonally adjusted annual rate, up from 2.9 percent for all of last year.
In April, food prices rose 0.4 percent, pushed up by a 3.2 percent increase in fresh vegetable prices, including a 14 percent increase in tomatoes.
Energy costs were up 0.2 percent. A decline in gasoline prices partly offset increases for home heating oil, natural gas and electricity.
In the Baltimore area, grocery prices fell 1.4 percent, following a 1.2 percent rise the month before, according to the Bureau of Labor Statistics. Energy prices, rising for the first time in five months, increased 0.4 percent because of a large rise in the price of motor fuel.
The trends present President Clinton with a troubling new challenge in his efforts to boost the national economy.
Asked yesterday about the latest economic report, Mr. Clinton told reporters he did not see evidence of long-term inflationary pressures, but added: "I think we have to watch it closely."
The Associated Press contributed to this article.