U.S. consumers got a respite from surging energy costs last month, a government report showed on Friday, but a wide array of other price rises showed inflation pressures mounting amid a strong economic recovery.

The consumer price index (search), the most widely used gauge of U.S. inflation, edged up a smaller-than-expected 0.2 percent in April, the Labor Department (search) said. But the so-called core CPI, which strips out volatile food and energy costs, climbed a steeper-than-forecast 0.3 percent.

Wall Street economists had looked for overall prices to advance 0.3 percent with the core index up just 0.2 percent.

A big jump in consumer prices in March had spooked financial markets and helped convince investors the Federal Reserve (search) would raise overnight borrowing costs from a 1958 low of 1 percent as soon as its next meeting at the end of June.

The latest rise in core inflation bolstered those expectations in the Treasury bond market, sending prices down and market interest rates up. However, the dollar eased against the euro on the mildness of the overall rise.

Over the last 12 months, core inflation has risen 1.8 percent, the biggest such gain since the period ended January 2003. Over the last three months, the core CPI has risen at a hefty 3.3 percent annual clip.

"It's pretty clear price pressures have picked up," said Jim O'Sullivan, an economist at UBS Investment Bank in Stamford, Connecticut. "It's hard to fight the direction. This only reinforces the case for the Fed to move as soon as the next meeting."

ENERGY EASES BUT...

Energy prices advanced just 0.1 percent last month, a welcome break for consumers who had weathered three months of skyrocketing energy costs. However, this may prove short-lived.

Crude oil prices (CLc1) vaulted to record highs on Friday on fears over the potential for supply disruptions in the Middle East and the strong demand of a recovering global economy.

While gasoline costs slipped 0.3 percent in April, prices at the pump have risen since then. The U.S. motorist group AAA said on Thursday gas prices hit yet another record high in the latest week at an average of $1.95 per gallon.

Food costs gained 0.2 percent in April, the CPI report said, matching the prior two months.

Housing and medical care costs continued to march higher last month, each rising 0.4 percent. But transportation advanced a mild 0.1 percent and the price of clothing, which had jumped 0.9 percent in March, was unchanged.

STOCK BUILDING

Separately, the Commerce Department (search) said U.S. companies bulked up their inventories in March, bringing stocks of goods on hand to a record level, but were unable to keep pace with strong demand.

Inventories rose 0.7 percent in March to a record $1.205 trillion. The gain, which was larger than analysts had expected, was the seventh straight monthly increase and followed a revised 0.8 percent jump in February.

Businesses are adding to their inventories to keep up with surging demand as the U.S. economy continues to rebound. Sales jumped a record 2.9 percent in March after a 0.9 percent rise in February.

The inventory-to-sales ratio, a measure of how lean businesses are keeping inventories, fell to a record low in March, reflecting an inability to keep shelves and warehouses filled. The ratio dipped to 1.30 months' worth of supply from February's 1.33 months' worth.

In a separate report, the Labor Department said real average weekly earnings climbed 0.2 percent in April after falling 0.7 percent a month earlier.