The nation got its first good inflation news of the year yesterday as the government reported that prices charged by producers rose 0.5 percent in April -- only about a third as much as in the three previous months.
The improvement came as energy prices eased up a little and food prices sharply declined. Wholesale prices of most other nonfood items continued to rise rapidly.
Economists have been predicting forsome time that inflation would ease up. The April figures could be the start of this and intensify pressure on the administration to shift economic policy to fight the oncoming recession instead of inflation.
There was more recessionary news yesterday, as the Commerce Department reported that retail sales plunged 1.2 percent in April after a 2.3 percent drop in March.
President Carter, in Philidelphia, was quick to hail the April inflation figures as "good news."
Carter also conceded that the credit-tightening in recent months by the Federal Reserve Board has had an impact "many times greater than what we'd thought." However, he said he expects a "quick rejuenation" in consumer spending.
The president also told a Philadelphia town meeting he expects to see Congress cut taxes next year when, he said the federal budget would be balanced and interest rates decline further. He also expressed hope that price rises would continue to slow. If the budget is balanced, it will be in part because of tax increases this year and next.
But not everyone was as optimistic as Carter about inflation.
Alfred E. Kahn, Carter's chief inflation adviser, said he found it "difficult to say anything very optimistic" about the April report. "It's all food," he said, referring to the sizable food-price decline.
Economists pointed out that the April decrease in food prices was unlikely to continue more than another month or two, while energy prices soon may start up again, spurred by Carter's new oil-import fee.
AFL-CIO President Lane Kirkland told a press conference in Hot Springs, Va., yesterday he saw little real hope for a significant decline in the inflation rate.
Disputing adminsitration predictions, Kirkland told reporters inflation would remain high even while unemployment rises. The AFL-CIO chief spoke at a meeting of The Business Council, an organization of the nation's leading industralists. [Details on Page F8.]
The new figures on producer prices brought inflation at the wholesale level to an annual rate of 6.2 percent, down from an 18.2 percent pace in March. It was the smallest such increase in 11 months.
The decline in wholesale food prices was the sharpest since June 1974. Prices of food items ready for shipment to supermarkets plummeted 2.8 percent in April, following a 1.1 percent increase in March. Meat prices fell sharply.
Energy prices also eased up markedly, rising 3.8 percent over the month after soaring 7.2 percent in March and 7.5 percent in February -- a sign that lastDecember's oil-price increase finally has worked its way through the economy.
There also was an easing-up of prices of goods at earlier stages of processing -- pointing to further relief in coming months. Prices of intermediate goods edged up only 0.1 percent, while prices of crude materials fell 3.5 percent.
At the same time, however, prices of finished goods other than food jumped 1.6 percent in April -- in line with a 1.5 percent rise in March -- while prices of capital equipment needed for business expansion, soared 1.9 percent.
Analysts say the April increase in capital equipment prices following on an 0.8 percent increase in March may have stemmed partly from Carter's wage-price guidelines, which allowed firms to raise prices for the new quarter beginning April 1.
There also were declines in prices of construction materials, which edged down 0.2 percent in the face of rapidly slumping demand in the housing industry. However, prices of steel products and aluminum rose sharply.
Yesterday's report brought the producer price index to 240 percent of its 1967 average, meaning it took $240 to buy the same goods at wholesale last month that cost $100 only 13 years ago. In the past year, the index has risen 13.5 percent.
Economists expect the inflation rate to begin easing further as the recession deepens and interest rates plunge still more. Many analysts now believe the recession could be relatively severe.