Wholesale Prices Increase a Modest 0.2% : Economy: The moderate performance of the producer price index in April was expected in the face of a recession.

WASHINGTON —  Wholesale inflation climbed a modest 0.2% in April after four consecutive months of declines, the Labor Department reported Friday. The increase reflects the end of recent sharp declines in energy prices and a temporary jump in fresh food prices.

Despite the increase, economists said the moderate performance of the producer price index is what they expected in the face of a recession. Wholesale inflation has been running at an annual rate of 2.9% this year, compared to 5.7% in 1990.

Excluding food and energy, the core rate of inflation for finished goods at the wholesale level also was 0.2% in April, the same as in March and lower than January or February. Like the overall rate, it signaled that wholesale inflation should remain mild this year.

“This shows us what we expect to see in a recession, with commodity prices dropping and pressure on manufacturers to cut prices for finished goods,” said David Wyss, an analyst with DRI/McGraw Hill in Lexington, Mass. “That’s good news for consumers. But it’s not such good news for manufacturing profits.”

Prices for most manufactured consumer goods rose 0.2% in April. Prices for plants, machinery and other capital goods dipped 0.2%, while prices of commodities, industrial materials and crude goods declined, in some cases by a full percentage point or more.

Wholesale energy prices fell a modest 0.3% after plunging by an average of 3.9% a month from December through March. From August through November, the Persian Gulf crisis had pushed energy prices up by an average of 7.4% a month. Even with the recent declines, wholesale energy prices rose 10.4% for the 12 months ended in April.

Wholesale food prices jumped 0.4% in April, propelled by a 34.3% surge in fresh and dried vegetable prices. The Labor Department attributed the increase to unseasonably warm weather in Florida, which hurt tomato and sweet corn crops, and on supply problems with onion crops in the Rocky Mountain states. Food prices increased 3.4% the past 12 months.

Economists said the April inflation figures for finished goods, intermediate goods and crude commodities were in line with expectations and illustrate the moderating influence on prices of an economy still in the depths of recession.

“The recession is doing its work in terms of controlling inflation, and we’re getting the usual benefit of that,” said economist Bruce Steinberg of Merrill Lynch in New York. “This report shows that prices were strongest in finished consumer goods and weakest in intermediate and crude materials and commodities. The weak materials prices show that recession was very much with us in April.”

Most analysts expect inflation for goods to remain low for the rest of the year, especially if recovery lags. But consumer price inflation, which also takes into account the cost of services, may be somewhat higher. Medical services in particular seem impervious to laws of supply and demand, and increases in sales, property and excise taxes at all governmental levels have been forcing many costs higher this year.

“Wholesale inflation should be benign into 1992,” Steinberg said. “With a gradual and probably weak recovery in prospect, we may get at least a year of grace and maybe even longer than that.”

Stacy Kottman, an economic analyst with Georgia State University in Atlanta, noted that prices of manufacturing and building materials normally could be expected to rebound as soon as the recession ends and manufacturers begin to replenish inventories. “But because the recovery is expected to be modest, we don’t see any inflationary surge in these commodities,” he said.

Before seasonal adjustment, the producer price index, keyed to a base level of 100 in 1982, rose 0.3 point to 120.9 in April. By that measure, a theoretical cross-section of finished goods that would have cost $100 in the base period would have cost $120.90 in April.

The Economy

* Indicator: The April producer price index, which tracks wholesale prices.

* What it did: Wholesale prices rose 0.2% after falling four consecutive months, as the plunging cost of gasoline and oil began to level off and food prices climbed slightly. The underlying core inflation rate, as measured by prices that exclude volatile food and energy costs, also rose 0.2% in the month--slightly more than economists had expected.

* What it means: Analysts discount the possibility that inflation is on the upturn. A low inflation rate indicates that the economy is so weak that manufacturers dare not raise their prices.

* Highlights: Gasoline prices slowed their steep decline, falling just 0.7%, and food prices rose an unexpected 0.4%, more than double the previous two months.

Producer Price Index Seasonally adjusted change from prior month.

April, ‘91: +0.2%

March, ‘91: -0.3%

April, ‘90:-0.1% Source: Labor Department