Consumer prices rose again last month after falling in March, but the increase of just 0.2 percent was still good news, the government said yesterday.
The monthly change was equivalent to an annual inflation rate of 3 percent, the Labor Department said, based on a more precise calculation of the April price increase.
The White House welcomed the inflation report. Deputy press secretary Larry Speakes said, "the news continues to be good. The trend toward lower inflation is obviously continuing."
However, that trend is at least partly due to the deep recession, which has pushed unemployment to a post-World War II record of 9.4 percent and has forced businesses to hold down their prices.
A record decline in gasoline prices in April was a major restraint on the inflation rate, but that positive factor appears to have run its course, as gasoline prices are now headed up again.
Further evidence that the recession continued in April came yesterday as the government reported separately that orders for durable goods declined by 3.9 percent, reversing the upturn in orders reported in February and March.
Orders for new capital equipment outside the defense sector--a guide to likely future business investment--dropped by 4.9 percent in April, the Commerce Department report said.
Business investment has been hit by a drastic profit squeeze this year as companies have held prices down in an attempt to hold onto shrinking markets.
Commenting on yesterday's price figures, Jerry Jasinowski, chief economist for the National Association of Manufacturers, said that "since unit labor costs in manufacturing are still rising at a 6 percent annual rate, the slowdown in price increases means that lower inflation has been achieved primarily at the expense of shrinking profits."
The monthly figures for orders and prices are seasonally adjusted.
Plunging energy prices have also contributed enormously to the decline in inflation in recent months. There was a record fall in gasoline prices in April, which helped to offset the effect of higher food and housing costs on the overall consumer price index, the Labor Department report said. The transportation index declined by 1.6 percent in the month.
Retail prices of energy products were 3.4 percent lower in April than they were a year earlier, Janet Norwood, commissioner of the Bureau of Labor Statistics, said yesterday. However, as oil prices have now begun to stabilize this anti-inflation bonus is unlikely to continue in coming months, analysts said.
The inflation rate for the first four months of this year was just 1.5 percent on an annualized basis, the Labor Department said. Consumer price inflation is likely to speed up from that low rate for the rest of this year, experts said, although it will probably still show an improvement from the double-digit inflation experienced in the late 1970s and in 1980.
Another factor in the marked improvement in inflation has been slower food price rises. Despite pulling up the CPI in April, food prices in the last year "decelerated sharply," helping to reduce the overall inflation rate, Norwood said.
"In fact, the rate of increase in food prices was more than cut in half" in the past 12 months, she said. These prices rose by 4 percent in the year to April, the release said.
Medical costs have been the major exception to the trend of lower inflation. Last month they climbed by 1 percent, bringing the increase over the 12 months to April to 12.1 percent.
The overall CPI has gone up by 6.6 percent in that time, the slowest annual increase since early 1978, Norwood said, and a "sharp slowdown from the 10 percent change recorded for the 12 months ended in April, 1981."
Housing costs swung round last month, according to the traditional CPI, which showed a 0.3 percent rise in the housing component in April after a 0.3 percent drop in March. However, the present CPI distorts the effect on consumer price inflation of changing housing costs, many experts believe, and the Bureau of Labor Statistics also produces a CPI index with a different measure of housing costs. This showed a decline of 0.2 percent in overall consumer prices in April, to a level 6 percent higher than a year ago.
The CPI stood at 284.3 in April, before seasonal adjustment. This means that goods that cost $100 in 1967 would have cost $284.30 last month.
Meanwhile, the Federal Reserve yesterday reported that the narrow M1 measure of the money supply rose by $2.3 billion in the week ended May 12 and was $300 million higher in the previous week than originally reported. M1 measures currency in circulation and all checking accounts.