PRICE SURGE

Most of the economic indicators released last week confirmed that the recovery is progressing well, except for one persistent problem area -- inflation. The surge in the cost of goods and services that began at the start of the year continued in April, when the consumer price index kicked up nearly 1%, to a compound annual rate of 10%. It was the third month this year in which the zigzagging inflation rate has hovered at or close to the double-digit level. The main cause, as in January and February, was increases in the cost of food (the largest single rise: ground coffee, up 13%). Because food supplies generally are expanding, experts believe that the current bulge in food prices has passed and that increases during the rest of the year ought to be much smaller.

There was healthy news on other fronts. Despite the bitter winter weather, the nation's total output of goods and services was revised upward to an annual rate of 6.4% -- adjusted for inflation -- during the first quarter. The preliminary figure released in April -- 5.2% -- was some what less rosy because earlier guesstimates about the pace at which businessmen were rebuilding their inventories had been too low. Industrial production remained strong in April, rising by nearly 1%. Although housing starts, at an annual rate of 1.8 million, were down from the March level, they were still an impressive 35% ahead of a year ago. And the seven-tenths of a percentage point rise in personal income in April, while only half as great as the sizzling increases of February and March, still translates into an infusion of more than $11 billion into the wallets of consumers, whose spending has been the prime force behind the recovery.

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