Consumer prices climb 0.3% in April

The cost of living in the U.S. rose in April by the most in almost a year, the Labor Department said Thursday in Washington.

Economists said the increase may be a sign that inflation is picking up as demand in the world's largest economy recovers from a weak first quarter.

The consumer price index increased 0.3 percent, the biggest advance since June, after rising 0.2 percent the prior month. The gain matched the median forecast of 82 economists surveyed by Bloomberg. Costs were up 2 percent in the past 12 months, the most since July, after a 1.5 percent year-over-year advance the prior month.

Inflation is inching up toward the Federal Reserve's target, giving officials reason to continue to scale back the central bank's unprecedented bond-buying program. Stronger hiring and faster wage gains will be needed to propel a pickup in demand and enable consumers to cope with higher prices.

"Inflation was a little too low, and this slight acceleration will be seen by the Fed as good," said Ryan Sweet, senior economist at Moody's Analytics Inc. in West Chester, Pa., who forecast a 0.4 percent gain. "The acceleration in inflation will be slow and steady over the next year."

Economists' estimates in the Bloomberg survey ranged from unchanged to a 0.5 percent advance.

Another Labor Department report Thursday showed the fewest Americans in seven years filed applications for unemployment benefits last week as the labor market continued to improve.

Stripping out volatile food and fuel from the consumer price index in April, the so-called core measure increased 0.2 percent, the same as in March. Economists had forecast a 0.1 percent increase, according to the survey median. The measure climbed 1.8 percent from April 2013, the biggest year-to-year gain since August, after a 1.7 percent increase in the prior 12-month period.

The Fed's 2 percent goal is based on the Commerce Department's inflation gauge that is tied to consumer spending. That measure climbed 1.1 percent in the 12 months through March.

Energy costs increased 0.3 percent from a month earlier. Falling fuel prices of late are giving households some relief after costs climbed to the highest level in a year last month.

Owners-equivalent rent, one of the categories designed to track rental prices, increased 0.2 percent.

Thursday's report showed food costs climbed 0.4 percent for a third consecutive month. The cost of meat increased 2.9 percent, the most since November 2003. The jump in pork was the biggest since July 1986.

As food prices rise, companies including Chipotle Mexican Grill are taking steps to pass some of the costs on to customers. The burrito chain may raise its prices by up to 6 percent this year, though even that won't offset all inflation, Chief Financial Officer John Hartung said April 29 at an industry conference.

"In terms of inflation, it's always going to be a challenge," said Hartung, adding that the company's beef prices were up 25 percent in April compared with the fourth quarter. "In every single market we are in, we've got pricing power. We've got more than we plan to take."

Weekly unemployment benefit applications dropped 24,000 to 297,000 last week, the Labor Department said. That's the fewest since May 12, 2007. The four-week average, a less volatile measure, dipped 2,000 to 323,250.

Applications are a proxy for layoffs, so the decline is evidence that employers are cutting fewer jobs. Weekly applications topped 650,000 in March 2009, during the recession.

Fewer people are also receiving benefits each week. The number of recipients fell to 2.67 million, the fewest since Dec. 1, 2007, when the recession began.

As applications have declined, hiring has picked up. Employers added the most jobs in 2½ years in April. Job gains have averaged 214,000 in the first four months of this year, up from an average of 194,000 in 2013.

The unemployment rate fell to 6.3 percent last month, from 6.7 percent. But the drop occurred because fewer people looked for work. The government doesn't count people as unemployed unless they are actively searching.

The improved hiring may help drive economic growth for the rest of the year, economists said.

The economy grew just 0.1 percent at an annual rate in the first three months of this year, largely because winter weather kept consumers away from shopping malls and discouraged home and car sales. Data released since then have suggested that the economy actually contracted in the first quarter by as much as 0.8 percent, analysts say. The government will release updated figures for the first quarter at the end of the month.

Analysts expect the economy will rebound in the current April-June quarter and grow at a healthy pace of about 3.5 percent. Consumer and business spending and homebuilding are rebounding from the cold.

In a separate report Thursday, the Fed said U.S. factory output slid in April after two months of strong growth. Manufacturers produced less furniture, machinery and plastics.

The report said factory production in April dropped 0.4 percent from the previous month after rising a revised 0.7 percent in March and 1.5 percent in February. Manufacturing output has risen a solid 2.9 percent over the past year.

Other measures of manufacturing have looked healthy. The Institute for Supply Management has reported that U.S. manufacturing grew faster in April than March. The Commerce Department has said orders to U.S. factories for long-lasting manufactured goods showed decent gains in February and March.

Overall industrial output, which includes manufacturing, mining and utilities, fell 0.6 percent in April. Output at utilities plunged 5.3 percent; households used less heat as temperatures rose.

Information for this article was contributed by Christopher S. Rugaber and Paul Wiseman of The Associated Press and by Victoria Stilwell, Kristy Scheuble and Jeanna Smialek of Bloomberg News.

Business on 05/16/2014

Upcoming Events