Prices paid to U.S. producers rose in April as food costs surged, pushing back risks that extended price declines may take root in the economy. The 0.3 percent increase was more than forecast and followed a drop of 1.2 percent in March, the Labor Department said today in Washington. Excluding fuel and food, so-called core prices climbed 0.1 percent, as anticipated. Signs that the worst of the recession is over may boost commodity costs further, alleviating concern over deflation, or an extended drop in prices that hurts the economy. Along with the trillions of dollars pumped into the banking system by the Federal Reserve, increases in raw materials may stoke inflation once an economic recovery takes hold. ``Inflation risks will become more visible once the economy begins to recover,'' Ryan Sweet, a senior economist at Moody's Economy.com in West Chester, Pennsylvania, said before the report. ``To prevent inflationary pressures from building, the Fed will quickly set its exit strategy into motion once a self- sustaining recovery takes hold.'' Prices paid to factories, farmers and other producers were forecast to rise 0.2 percent in April, according to the median estimate of 68 economists in a Bloomberg survey. Estimates ranged from a decline of 0.6 percent to a gain of 1 percent. A separate report from Labor showed more Americans than forecast filed first-time claims for unemployment insurance last week, mainly reflecting a jump in applications related to the Chrysler LLC bankruptcy. More Claims Initial jobless claims rose by 32,000 to 637,000 in the week ended May 9, from a revised 605,000 the prior week. A ``good part'' of the jump was from states reporting an increase in auto- related claims, a spokesman for Labor said without providing a more precise estimate. Companies paid 3.7 percent less for goods in the 12 months ended in April, the biggest drop since 1950 and reflecting the collapse in fuel costs last year that has since been partially reversed, today's report showed. The increase in wholesale prices was led by a 1.5 percent jump in the cost of food, the biggest gain in more than a year. The price of fresh eggs jumped 44 percent, the most since records began in 1992. DuPont Co., the third-biggest U.S. chemical maker, and Dr Pepper Snapple Group Inc., the beverage maker spun off by Cadbury Plc last year, are among companies able to charge more. Wilmington, Delaware-based Dupont raised prices 5 percent on average in the first quarter and said demand will improve because most customers have used up inventories and are increasing purchases. Sales Stabilize ``We expect sales in the second quarter to be flat to slightly up from the first quarter,'' Chief Executive officer Ellen Kullman said on a call with investors on April 21. Plano, Texas-based Dr Pepper Snapple yesterday reported first-quarter profit that beat analysts' estimates and raised its 2009 forecast after increasing prices and cutting expenses. ``Markets and consumer sentiment appear to be on the mend,'' Chief Executive Officer Larry Young said during a conference call with analysts. Wholesale fuel costs dropped 0.1 percent, Labor's report showed, as declines in natural gas and electric power offset gains in diesel fuel and gasoline. Excluding food and fuel, the gain in expenses was led by a jump in the cost of light trucks and pharmaceuticals. Declines in tobacco products and civilian aircraft limited the gain. Bigger Incentives Vehicles costs may not keep climbing as automakers boost discounts to get rid of unwanted inventory. Chrysler, whose U.S. sales tumbled 48 percent in April from the same month last year as bankruptcy neared, said last week it will offer rebates of as much as $6,000 to lift demand. The incentives began May 6 and end June 1. Producer prices are one of three monthly inflation gauges reported by Labor. Prices of goods imported into the U.S. rose 1.6 percent is April as petroleum costs surged, the government said yesterday. Labor figures tomorrow may show consumer prices were unchanged last month after declining 0.1 percent in March, economists forecast. Smaller declines in manufacturing and an easing in the housing slump indicate the worst recession in at least 50 years may be starting to abate. The economy will probably shrink at a 1.9 percent annual pace this quarter after contracting at an average 6.2 percent rate in the prior six months, according to economists surveyed this month. Sales Fall Still, a report yesterday showed consumers aren't yet totally out of the woods. Retail sales fell 0.4 percent in April after a 1.3 percent decline in March, according to data from the Commerce Department. For their part, Fed policy makers are still more focused on the threat that prices will fall. ``In light of increasing economic slack here and abroad, the Committee expects that inflation will remain subdued,'' policy makers said after their April 29 meeting. Still, there remained ``some risks that inflation could persist for a time below rates that best foster economic growth and price stability in the longer term.''

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