But outside of the volatile energy and food sectors, prices were unchanged last month, the second straight reading of zero for the closely watched core inflation index.
In other economic news, the Commerce Department reported that retail sales fell by 0.2% in April while inventories held by businesses on shelves and backlots fell 0.1% in March, the biggest decline in inventories in nearly two years.
The drop in sales served to underscore the tough environment for retailers last month as they battled a slumping housing market and rising gasoline prices, which left Americans with less to spend on other products. The nation's retailers had reported disappointing April sales in a survey released Thursday.
The 0.1% fall in business inventories was the largest fall since a 0.3% decline in July 2005 and reflected a big 0.7% drop in stockpiles held by retailers. The cutback came as retailers tried to get control of their stockpile in the face of a slowing economy.
The 0.7% increase in the Producer Price Index, which measures inflation pressures before they reach the consumer, was in line with expectations. The zero reading for the PPI excluding food and energy was better than expected, providing welcome news for officials at the Federal Reserve.
The Fed on Wednesday signaled that it continued to be more worried about the threat of inflation than the year-long slowdown in economic growth.
However, other economists believe the economy could be vulnerable to a possible recession, especially if the troubles in the housing sector deepen and the recent spike in gasoline prices triggers a cutback in consumer spending on other items.
Gasoline prices have surged to a record nationwide average of $3.07 a gallon, nearly 20 cents higher than two weeks earlier, according to the latest Lundberg Survey. That surpassed the old record of a nationwide average of $3.03 a gallon set last August.
Food prices, which had been surging, rose a more moderate 0.4% in April as big increases for vegetables, beef and chicken products were offset by declines for eggs and fruit.
Energy prices rose by 3.4%, led by the 8.2% increase in gasoline but also reflected a 8.7% jump in liquefied petroleum gas and a 4.8% jump in home heating oil.
Outside of food and energy, the unchanged performance of core inflation reflected a decline of 1% for new cars and a 0.5% drop in the category that includes sport utility vehicles.