Wholesale Prices Climb 0.4 Percent

Economy

Wholesale prices climbed by 0.4 percent in April, but almost all of the increase was for gasoline and other energy costs.

The Clinton administration insisted that Friday’s report showed that inflation is not a problem and financial markets seemed to agree as both stock and bond markets rallied.

Investors were happy that the overall increase in the Labor Department’s Producer Price Index was down from a 0.5 percent advance in March.

Even more significant, analysts said, was that the underlying inflation rate, excluding food and energy, was up a tiny 0.1 percent.

The Dow Jones industrial average jumped more than 50 points right after the opening bell and finished the day up 43 at 5,518.14. The stock market was buoyed by big gains in bond prices.

Heavy demand helped to push the yield on Treasury’s benchmark 30-year bond down to 6.93 percent, compared to 7.01 percent in trading late Thursday.

“Inflation is being held in check,” said Labor Secretary Robert Reich. “There are no signs of accelerating inflation.”

Analysts said Friday’s price report helped to ease investor fears that rising inflationary pressures and faster economic growth would prompt the Federal Reserve to start raising interest rates.

Other economic news last week:

The Federal Reserve said Wednesday that the U.S. economy grew at a moderate pace in March and April, with stronger activity in retail sales, real estate and even manufacturing.

In its latest survey of regional economic conditions, the Fed said all districts except New York reported a pickup in economic activity during the past two months with most reporting strength in retail sales and manufacturing.