Bloomberg News

WASHINGTON - Prices paid to U.S. factories, farmers, and other producers fell in April for the first time in more than a year as costs declined for oil and gasoline.

The producer price index fell 0.3% last month after 1% gains in each of the prior two months, the Labor Department said Friday. The index's core rate, which excludes food and energy, rose 0.1%, matching March's increase and up only 1.3% from a year earlier.

Christopher Low, chief economist at First Tennessee Capital Markets in New York, said nothing in the price index suggests an inflation problem. "The only significant surprise was good news," that prices of raw materials excluding food and energy fell for the third month in a row, he said.

A separate report from the Commerce Department showed business sales rose in March at four times the rate of growth in inventories. The inventory-sales ratio, a measure of how long goods remain unsold, fell to its lowest point ever, a sign factories may need to boost output to meet demand.

The University of Michigan's consumer confidence index, also released Friday, suggested that spending may keep growing. It rose to 110.9, from 109.2 in April. The index is near its peak of 112, reached in January.

The reports do not alter expectations that the Federal Reserve will raise interest rates Tuesday for the sixth time since last June, analysts said. "The economy is still too hot for the Fed's comfort," said Robert Dederick, an economist at Northern Trust Co. in Chicago.

The Commerce Department report showed that business sales rose 1.2% in March, to $889.2 billion, after rising 0.4% the month before. Inventories rose 0.3%, to $1.165 trillion, after gaining 0.5% in February. That reduced the inventory-to-sales ratio, a measure of the time goods sit on shelves at factories, wholesalers, and retailers, to a record-low 1.31 months, from 1.32 months in February.

Analysts had expected the producer price index to fall 0.2% and the core rate to rise 0.1%.

Compared with April of last year, the index is up 3.9%. That's down from the 12-month increase of 4.5% through March. For all of 1999, producer prices rose 2.9%.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.