INDUSTRIAL PRICE INDEX ROSE SLIGHTLY LAST WEEK

INDUSTRIAL PRICE INDEX ROSE SLIGHTLY LAST WEEK

The Journal of Commerce Industrial Price Index rose slightly in the latest week, reflecting higher prices for cotton, lead, hides, rubber and benzene.

These gains were offset in part by declines in aluminum, plywood and crude petroleum.The index was 103.1 on Friday compared with the previous Friday's 102.8.

The smoothed rate of change in the index remained negative, however, pointing to a lessening of inflationary pressures.

Rates of change in the index and subindexes are computed by a formula that smooths away some of the erratic fluctuations in day-to-day movements in prices. The calculation is done by dividing the current index by the average during the past 250 business days, which covers roughly a year.

The commodities in the index comprise just one factor in overall industrial costs and a small part of general inflation. But the index converts these prices for materials - yet to be processed into finished goods consumers can buy - into a reliable warning signal of future consumer inflation trends.

The index has anticipated every major reversal in inflation for the past 40 years, usually by less than a year. Occasionally, however, the index registers movements that are not reflected in the overall inflation rate.

Severe supply shortages sparked a surge in lead and other base metal prices last week.

Output was halted at Nuova Samim's Porto Vesme lead plant in Sardinia last August, and the company said the facility isn't likely to be back in action until June.

In addition, production problems have hit Noranda's Belledune smelter in Canada, which has been forced to close for several weeks because of a shortage of feed. There was also talk last week of production problems in Morocco.

Analysts said lead, in common with the other base metals, has seen steady demand in Europe and has recently drawn further support from a more bullish perception of the U.S. demand picture. The gain of 372,000 non-farm jobs in February points to a rebound in the economy, analysts said.

The consensus is that over the next two to three months lead will remain in very tight supply. London dealers told Knight-Ridder Financial last week that cash lead prices could rise to "astronomical" levels.

Noranda Sales Corp. Friday raised its U.S. lead prices by 5 U.S. cents a pound to 50 cents, and its Canadian prices 5.50 Canadian cents a pound to 59 cents, effective immediately.

Cotton prices rose last week and Thursday's U.S. cotton export sales figures were considered to be an indication of good demand by foreign mills for U.S. cotton.

Meanwhile, the surge in plywood prices of a week earlier was reversed as winter weather-related problems eased. Prices dropped to $219 a 1,000 board feet from $230 for the Western sheathing 4/5 ply, 1/2-inch grade.

Oil prices declined last week on a seasonal basis. There also were reports that Organization of Petroleum Exporting Countries' production is edging higher.