Jump in Food Costs Drives Up Prices

Man, That carton of orange juice prices is a stick up without a doubt

By JACK HEALY

Wholesale prices in the United States rose slightly in April, the government reported on Thursday, as falling oil and gasoline prices leveled off and food prices rose the most in a year.

The Labor Department reported that prices received by producers of finished goods rose 0.3 percent last month, further discounting the prospect that the economy was veering into a vicious cycle of lower prices and lower wages known as deflation.

But for some economists, the prospect of rising energy and food prices at a time of deep unemployment and shrinking wages raised concerns that strapped consumers could see their cost of living rise even as the job market continued to get worse.

Although falling producer and consumer prices raised fears about deflation last year as the recession deepened and the financial crisis broke, the end of $4-a-gallon gas and lower heating and energy costs effectively put billions of dollars into consumers’ pockets.

“There’s this squeeze going on,” John E. Silvia, chief economist at Wachovia Corporation, said. “We still have job losses. We still have a lot of pressure. And now you’re going to tell me that a lot of these basic commodities are rising? People’s real income is going to get squeezed.”

The price index for intermediate goods fell 0.5 percent while the price for crude goods rose 3 percent because of rising food and energy prices.

Wholesale and consumer prices have stabilized somewhat this year, although producer prices are down 3.7 percent from last April. The Federal Reserve said it was concerned about anemically low inflation, but expected that inflation would run at a rate of 0.3 percent to 1 percent this year.

Much of the increase in producer prices in April was the result of a 1.5 percent jump in food prices. Egg prices rose sharply while prices for beef, coffee, vegetables and fresh fruit also increased.

Gasoline prices rose 2.6 percent, reflecting the end of a plunge in crude oil prices after rounds of production cuts by the OPEC cartel and a plateau in demand for oil and gasoline. Crude prices have risen from their recent lows of $33 a barrel to almost $60, and gasoline prices have ticked up to nearly $2.30 a gallon, according to AAA, the automobile club.

The so-called core Producer Price Index, which excludes food and energy prices, rose 0.1 percent after staying flat a month earlier.

Also on Thursday, the Labor Department reported that first-time claims for unemployment rose more than expected last week, to 637,000 from a revised 605,000 the week before. Much of the increase was to the result of layoffs in the automobile industry, which is shrinking rapidly as it tries to stay afloat.