In April, Wholesale Prices

Rose as Retail Sales Slowed

Wholesale prices leaped an unexpected 0.7 percent in April, while sales slowed at U.S. retailers, the government said in reports that added fuel to fears of inflation and rising interest rates.

Soaring gasoline costs contributed to the jump in prices paid by goods producers and sagging retail sales last month, economists said. Rising prices at the pump may be persuading consumers to put off shopping, especially for items not urgently needed, such as new clothes and cars, Lehman Brothers told clients. Retail sales fell 0.5 percent last month, led by a sharp decline in auto sales.

Fuel prices drove up costs throughout the economy last month. Gasoline costs rose 3.4 percent in April, while wholesale finished food prices climbed 1.4 percent and are now up 5.9 percent compared with a year ago. The prices of dairy products shot up 10.4 percent, the biggest monthly increase since 1946.

-- Jonathan Weisman

U.S. Trade Deficit Grows

To $46 Billion in March

The U.S. trade deficit swelled to a record $46 billion in March, propelled by rising prices for imported oil and consumers' unending hunger for goods from abroad.

The previous monthly high for the trade deficit, in January, was $43.5 billion.

The widening of the trade gap, reported by the Commerce Department, was the latest in a series of setbacks that have cast a shadow on the generally bright U.S. economic outlook. Interest rates have moved up in recent weeks with concern that inflationary pressures may prompt the Federal Reserve to tighten credit, and on Tuesday crude oil prices closed above $40 a barrel on the New York Mercantile Exchange for the first time since 1990.

The trade statistics were more evidence that U.S. consumers remain in a buying mood as the economic expansion gathers steam, but the figures also showed that much of that demand is for imported cars, electronic gadgets and other foreign products.

That surprised analysts because it came despite a decline in the dollar's value against other currencies over the past couple of years. A lower dollar makes imported goods more expensive relative to products made in the United States.

-- Paul Blustein

Chechnya's Pro-Russian Leader

Is Killed in Blast at Stadium

Chechnya's pro-Russian leader, Akhmad Kadyrov, was killed by a powerful explosion that ripped through a stadium in the capital of the rebellious republic in one of the boldest recent attacks in a secessionist war that persists despite Kremlin claims that it is largely over.

The blast also injured Col. Gen. Valery Baranov, the top field commander of Russian forces who are trying to pacify the separatist region. At least seven people died and about 50 were wounded in the blast, Russian officials said.

President Vladimir Putin, who had handpicked Kadyrov to run the republic and had again proclaimed his Chechen pacification policy a success as recently as his inauguration on May 7 to a second term, announced Kadyrov's death in televised remarks May 9.

-- Susan B. Glasser and Peter Baker

Citing Support of Terrorism,

U.S. Slaps Sanctions on Syria

Under pressure from Congress, President Bush slapped sanctions on Syria for supporting terrorism and interfering with U.S. efforts to stabilize Iraq.

The White House said the sanctions include banning U.S. exports to Syria except for food and medicine, prohibiting Syrian aircraft from flying to and from the United States, freezing certain Syrian assets and cutting off relations with a Syrian bank because of money laundering concerns.

Since the Sept. 11, 2001, terrorist attacks, the Bush administration has wavered about how tough its policy should be toward Syria. Some administration officials have been deeply suspicious of Damascus, believing its support of terrorism and development of weapons of mass destruction make it a potential candidate for the "axis of evil" that Bush had said consisted of North Korea, Iran and the former government of Iraq. But others have argued that Syria has been helpful in the war on terrorism, specifically in providing intelligence that helped thwart at least one potential attack.

The practical effect of the new sanctions is mostly symbolic. Diplomatic relations will not be cut.

-- Glenn Kessler

In Boost for Democrats, FEC

Rejects Limits for '527s'

The Federal Election Commission cleared the way for liberal groups to continue to raise and spend millions of dollars in unrestricted contributions to defeat President Bush in the 2004 election.

By a 4 to 2 vote, with two Republicans voting in the affirmative in defiance of the party, the commission rejected a plan that would have reined in these independent groups before the election. It was a significant setback for Bush and the Republicans and a boost for Sen. John F. Kerry (Mass.), whose Democratic presidential campaign has benefited greatly from the spending by these groups.

Most of these new organizations have been established as "527s," shorthand for the provision of the federal tax law that covers their activities. The 527s are controversial because they accept "soft money" from corporations and unions, which critics say represents an evasion of the ban on large, unregulated contributions in the new campaign finance law known as the McCain-Feingold Act, and because they operate under less stringent disclosure regulations.

These new Democratic organizations have drawn support from some wealthy liberals determined to defeat Bush -- including financier George Soros and his wife, Susan Weber Soros, who have given $7.5 million to two of the most prominent groups, America Coming Together (ACT) and

-- Thomas B. Edsall

Former FBI Official Agrees to

A Deal in Case of Accused Spy

A former FBI counterintelligence supervisor pleaded guilty to lying about a long-running affair he had with a prized bureau informant now accused of spying for China.

In a plea agreement that could keep him out of jail, James Smith appeared before a federal judge in Los Angeles and admitted that he had concealed his affair with Katrina Leung during a routine FBI background review in 2000.

Smith, 60, agreed to cooperate with the government's investigation into Leung's suspected 20-year penetration of FBI counterintelligence efforts, which could include testifying against her if she is tried next year. In exchange, charges involving mail fraud and mishandling of classified documents against Smith will be dropped.

By agreeing to the unusually light sentence, officials said, the government hopes to build a stronger case against Leung, speed its damage assessment and avoid having to air more national security information during a court trial.

-- Susan Schmidt and Kimberly Edds

EPA Sets New Rules for

Off-Road Vehicles' Emissions

The Bush administration announced tough new rules to curb harmful emissions from off-road diesel-powered vehicles, pleasing environmentalists after brokering a compromise with industry on deadlines.

Off-road diesel-powered vehicles, such as bulldozers, tractors and irrigation equipment, are among the largest sources of pollutants that scientists have linked to premature deaths, lung cancer, asthma and other serious respiratory illnesses. The regulations are expected to reduce the emissions of nitrogen oxide and other pollutants from diesel engines by more than 90 percent over the next eight years.

"This is a big deal," Environmental Protection Agency Administrator Mike Leavitt said. "Nearly everyone will remember when we took the lead out of gasoline. We are now going to take sulfur out of diesel. The black puff of smoke will be a thing of the past."

Although the administration usually comes under criticism from environmentalists, Monday's announcement brought plaudits from members of the green community.

In recent years, scientists and environmentalists have focused on the dangers associated with high sulfur levels in non-road diesel fuel, which produce microscopic particles that invade the lungs. EPA officials predict that within 30 years, the new regulations will prevent more than 12,000 premature deaths and will save billions of dollars in hospital and medical costs.

-- Juliet Eilperin