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Gas boosts wholesale prices

The increases in April hurt U.S. consumers, along with softer job and housing markets.

WASHINGTON - Wholesale prices surged 0.7 percent in April, led by a third consecutive big rise in gasoline prices, the government said yesterday.

The price increase and a second government report yesterday - showing weak retail spending in April - were seen as delivering a double whammy to the economy. The worry is that, if gasoline prices spike further and the troubles in the housing market deepen, then consumer spending could be cut back further and the country could move toward a recession.

In Washington, a city with some of the longest commuting times in the country, consumers were definitely feeling the pinch of the higher gasoline prices.

"It's highway robbery," Andi Powell, 33, said yesterday. She said she and her boyfriend were spending about $90 a week for gas for their commute to Washington from Baltimore.

"I just started to do a lot more home entertaining, just trying to find ways to make up the difference" in the higher gas costs, Powell said.

Zenobia Jackson, 32, of College Park, Md., said she was spending $60 to $80 a week for gas to drive to her computer job in Virginia. "There's not much I can do," she said.

"The higher gasoline prices, combined with a weakening housing market and a softer job market, are weighing on consumers," said Mark Zandi, chief economist at Moody's in West Chester, Pa.

Former Federal Reserve Chairman Alan Greenspan, who sent financial markets into a tailspin back in February with his worries about a recession, used the "R" word again yesterday, although he sought to put a more positive spin on his views, emphasizing the likelihood that a downturn could be avoided.

"The odds are 2 to 1 that we won't have a recession," Greenspan said in a speech delivered by satellite to a business group in Singapore, according to a participant.

Wall Street was not jolted by Greenspan's latest comments, as investors took comfort from the price report because it showed little price pressure outside the volatile areas of energy and food.

The so-called core rate of inflation was unchanged in April, better than the 0.2 percent rise analysts had expected.

The Federal Reserve this week kept interest rates where they have been since last June, with officials saying they remained more worried about the threats from inflation than the weakening economy. Some analysts said the Fed could be making a mistake by keeping rates too high for too long, especially if consumer spending, which accounts for two-thirds of total economic activity, weakens further.

"Consumers are being pressured by surging energy and food costs, and they don't have that much left over to spend on lots of other things," said Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pa.

Analysts said motorists were likely to see gas prices rise even higher in May, reflecting a loss of refinery capacity this spring because of unexpected shutdowns. Gasoline surged to a record nationwide average of $3.07 a gallon, nearly 20 cents higher than two weeks earlier, according to the latest Lundberg Survey. That surpassed the record of $3.03 a gallon set last August.

The 0.7 percent increase in wholesale prices last month followed an even larger 1 percent jump in March, with gasoline prices rising by more than 8 percent in each month.

Wholesale food costs were up 0.4 percent in April, a significant slowing after four straight months of 1-percent-plus readings. Outside of food and energy, the unchanged performance of core inflation reflected declines of 1 percent for new cars and 0.5 percent for the category that includes sport-utility vehicles.

Wholesale Prices   

Percentage change from March to April for major commodities.

Fresh vegetables+8.9


Home heating oil+4.8

Processed chicken+3.0


All finished goods+0.7

Passenger cars-1.0

Household appliances-1.3


Fresh eggs-2.3

Fresh fruits-2.8

SOURCE: Bureau of Labor StatisticsEndText