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Wholesale Prices Lodge Surprise Spike

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The Associated Press

Published: February 20, 2009

WASHINGTON - Inflation at the wholesale level surged unexpectedly in January, reflecting sharply higher prices for gasoline and other energy products.

The Labor Department said Thursday that wholesale prices increased by 0.8 percent last month, the biggest gain since last July and well above the 0.2 percent increase economists had expected.

The acceleration was led by a 3.7 percent surge in energy prices with gasoline prices jumping by 15 percent, the biggest gain in 14 months.

Even outside the volatile food and energy sectors, wholesale prices showed a bigger-than-expected increase, rising by 0.4 percent. Economists had expected a slight 0.1 percent rise in so-called core inflation.
Food prices were well-behaved last month, falling for a second straight month. The 0.4 percent decline in January reflected lower costs for beef and dairy products, which offset gains in the price of vegetables and chicken products.

Outside of food and energy, there were increases for pharmaceuticals, light trucks and passenger cars, and civilian aircraft.

Despite the big jump in wholesale prices in January, economists do not think inflation is on the verge of becoming a problem, given the country's deep recession.

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