Wholesale Inflation Continues to Climb in April

In a reversal of what was expected, headline wholesale finished goods prices increased a more modest 0.2 percent while core PPI prices rose a stronger-than-expected 0.4 percent in April. After a large increase in March, food prices remained flat in April while energy prices, on net, slipped 0.2 percent. Inflation in the pipeline continues to build.

Core Rises More Than Expected

* Yr/Yr core PPI has risen to a 16 year high of 3.0 percent.
* Elevated commodity prices have encouraged more investment into the sector. This increased demand for equipment showed up in the April report as solid gains were reported in metal forming machine tools, mining & machinery equipment and oil field & gas machinery equipment.

Profit Margins Remain Under Pressure

- Like last week's CPI report, energy prices slipped as increases in wholesale gasoline did not rise as much as was anticipated by the seasonal adjustment process.
- Wholesalers' profit margins remain under pressure in this inflationary environment. Weak domestic demand is making it difficult to pass along the price increases to retailers.

Wachovia Corporation