Consumer prices move slightly higher in April

U.S. consumer prices rose less than expected in April, according to a government report Tuesday that offered some signs that inflation pressures might be easing.

The Labor Department’s consumer price index advanced by 0.4% in April, slightly less than Wall Street expected and below the 0.6% rise seen in March.

The core rate, which excludes volatile food and energy prices, increased 0.2%. Although that marked a slight step up from March, the 12-month increase in core prices slipped to 2.3%, the smallest gain in a year.

Analysts said this latest reading suggested the Federal Reserve’s efforts to tame inflation might be working, even though medical costs bounced back up, and food and energy prices continued to rise.

“This only reinforces the view that the Fed is on hold and that inflation remains contained,” said Alex Beuzelin, senior market analyst at Ruesch International. Since June, the Fed has kept benchmark overnight interest rates steady but has continued to warn about inflation risks.

During the first four months of this year, the overall consumer price index rose at a 4.8% annual rate. That compares with a gain of 2.5% for all of 2006. But price advances were more moderate excluding food and energy, with the core rate advancing at just a 2.2% rate during the first four months, after rising 2.6% in 2006.

“The acceleration thus far this year was due to larger increases in the energy and food components,” the Labor Department said.

Food prices advanced 0.4% last month, while energy rose 2.4%. For the first four months of this year, food and energy rose at annual rates of 6.7% and 25.3%, respectively.

Gasoline prices have risen 43% this year. According to government data, the national average pump price hit a record $3.10 a gallon this week because of strong gasoline demand, less-than-normal imports and a drop in inventories that reflected the shutdown of refineries.

These pump prices have helped cut into consumer spending power. The Labor Department said weekly earnings, after adjustment for inflation, dropped by 0.5% in April, the biggest decline in nearly a year.