Inflation Not a Factor In Economic Policy

The Labor Department's measure of overall producer price inflation declined by 0.2% between March and April, following a steep 1.0% increase the month before. Energy prices rose by another 2.5% during April after surging 5.5% between February and March. After rising by a cumulative 2.4 percentage points over the first three months of 2002, average food prices charged at the producer level plunged 3.2% during April.

The inflation rate for other finished goods, excluding the volatile food and energy components—a measure often referred to as the core Producer Price index (PPI)—rose by a scant 0.1% for the second month in a row during April. Over the first third of this year, the net change in the core PPI was actually slightly negative.

On a seasonally adjusted basis, capital equipment prices edged down 0.1% in April after rising by the same amount a month earlier. Overall capital equipment prices this April actually averaged 0.4% less than during April of 2001, indicating the absence of any inflation at all for this product group, which includes printing equipment and papermaking machinery.

There's no sign that inflation is building anywhere in the supply chain pipeline. At the bottom of the chain, the Crude Goods PPI declined in both March and April, while the PPI for Intermediate Goods fell this April following a scant 0.3% gain over the first quarter of 2002.