U.S. Wholesale Prices Rise On Energy Costs
By Caren Bohan
WASHINGTON (Reuters) - U.S. wholesale prices edged higher in October, boosted by higher costs for energy and passenger cars, the Labor Department said Friday.
The Producer Price Index increased by 0.2 percent following a 0.3 percent rise in September. The closely watched core index, which strips out volatile food and energy costs, inched up 0.1 percent after a 0.4 percent gain in the prior month.
The increases exceeded the expectations of U.S. economists in a Reuters survey, who had forecast a 0.1 percent rise in the overall PPI and an unchanged reading on the core index.
However, market reaction was muted following the simultaneous release of the price index and surprisingly strong U.S. retail sales figures for October. The price of Treasury securities softened slightly immediately following the data release and the dollar firmed.
"Inflation is really down for the count and for now is of no real concern to Fed policy makers. We're as close to perfect as you can get on that front," David Jones, Managing Director and Chief Economist at Aubrey G. Lanston, said.
"We're in a stable price environment."
Federal Reserve policymakers are scheduled to meet Tuesday and most economists expect them to lower key short-term interest rates for a third time in less than two months to boost the economy.
Despite last month's increase, the PPI was still down by 0.7 percent from October 1997. Slumping global demand for oil has sent energy prices tumbling for much of this year, helping to push the PPI down. But in October, energy costs had a rebound, rising 1.2 percent following a 0.1 percent drop in September. Gasoline prices were up 5.7 percent in October, but heating oil costs eased by 0.4 percent.
Passenger car prices gained 0.5 percent following a 2.2 percent rise in the prior month.
"Autos rose half a percent, which was a little surprising. But we know the trend in auto prices is more subdued than that, so this is an aberration," said Greg Jones, chief economist at Briefing.com.
Food prices rose by 0.4 percent after a matching increase in the prior month. Higher prices for fruits and vegetables were partly offset by declines in prices for fish, pork and beef and veal.
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