Originally created 05/14/98

Lettuce, tobacco costs up



WASHINGTON -- Prices paid to factories and other producers rose in April for the first time in seven months. The overall increase wasn't much, but smokers and salad eaters were hit hard.

Tobacco costs jumped again and lettuce posted a whopping 150 percent increase after El Nino's rains washed out California vegetable fields. Still, prices paid by wholesalers for finished goods rose a modest 0.2 percent after seasonal adjustment.

According to a separate report Wednesday, retail sales perked up last month, rising 0.5 percent. Easter and school holidays provided a hoped-for rebound after a lull in March.

"It all fits into this picture that the economy is growing smoothly without any visible dangers of inflation," said economist Oscar Gonzalez of John Hancock Financial Services in Boston.

Together, the reports, from the Labor Department on prices and from the Commerce Department on sales, offered welcome reassurance of American stability to Wall Street traders. They are jittery about Asia's economic and political prospects after the fatal shooting Tuesday of six student protesters in Indonesia.

The Dow Jones average of industrial stocks jumped 50 points to 9,212, topping the previous record close on May 4 by 19 points. Bond prices rose too, pushing down long-term interest rates.

Investors found little evidence suggesting Federal Reserve policy-makers, scheduled to meet Tuesday, will need to raise short-term interest rates to cool economic growth and prevent inflation from developing.

Though the April increase in producer prices was the first since September, it didn't ring any inflation alarm bells because much of it was attributed to special factors not expected to last.

Meat costs increased, 4.7 percent for beef and 2.9 percent for pork. Vegetable and fruit prices rose steeply too, up 6.9 percent and 4.7 percent, respectively.