Wholesale Inflation Surges
WASHINGTON (Feb. 20) - Prices paid to producers in January soared at their fastest pace in over a decade, pushed up by rising energy and auto costs, the government said Thursday in a report showing far more evidence of inflation than expected.
Overall producer prices climbed 1.6 percent, the largest rise since January 1990, and surpassing forecasts for a 0.5 percent increase. The number followed a 0.1 percent drop the previous month.
Excluding volatile food and energy goods, prices still rose 0.9 percent, the fastest rise since December 1998 and also way above forecasts of 0.1 percent.
''The report shows that energy prices could still hurt us. The Fed doesn't have as much room to play with,'' said David Wyss, chief economist at Standard & Poor's in New York.
The report will likely come as a surprise to Federal Reserve Chairman Alan Greenspan, who said last week that he sees little sign of inflation in the economy.
''We're still looking at the broad measures of average inflation and the best statistics that we have still indicate very low inflation with no evidence of an acceleration,'' Greenspan said.
However, the central bank chief had also said the Fed would continue to keep an eye out for any inflation pressures that might emerge.
The Fed and financial markets will be looking at Friday's report on consumer prices for a more complete picture of inflation pressures.
In Thursday's report, gasoline and home heating oil prices surged as cold winter weather boosted demand and uncertainty over a possible war in Iraq took its toll on energy prices.
Gasoline prices climbed 13.7 percent while heating oil rose 19.7 percent.
Prices of passenger cars showed their fastest gain since October 1986, rising 3.5 percent. Auto manufacturers cut back on financial incentives in January, pushing up prices, after a bumper month for car sales in December fuelled by attractive pricing offers.
Prices in sectors outside autos and energy also rose. Pharmaceutical costs climbed 1.2 percent and capital equipment prices rose 0.7 percent. Food prices were up 1.6 percent.
Reut09:21 02-20-03
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