Wholesale Prices Rise on Higher Gas Costs
Washington (AP) - Wholesale prices rose in October for the fourth straight month due to higher gas costs, but there was little sign of inflation as the cost of food, cars and computers all fell.
The Labor Department said Tuesday that the Producer Price Index rose 0.4 percent last month, the same increase as September and August. Wall Street analysts had expected a larger increase. The index is up by 4.3 percent in the past 12 months.
But excluding the volatile food and energy categories, the so-called core index fell by 0.6 percent, the most in more than four years. That decline was driven by falling prices for new cars and trucks.
The report, which measures prices pressures before they reach the consumer, showed that companies have little ability to pass on the higher costs they are paying for grains and other commodities. Food prices fell slightly, confounding economists' expectations that they would rise due to higher costs for corn, soybeans and sugar.
The drop in the core index was driven by lower prices for new cars and pickup trucks. Car prices fell by a seasonally adjusted 3 percent, the department said, and pickup truck prices fell by 4.3 percent. Both were the biggest drops in about four years.
The department incorporates the price impact of the new model cars that automakers introduce each year in the October index. New car prices rose last month, but by less than in previous years. Under the department's seasonal adjustment process, that translates into a lower price.
Consumers responded by purchasing cars at the healthiest pace since the Cash for Clunkers program in August 2009. Sales at auto dealerships rose by 5 percent in October, the Commerce Department said Monday.
Grain prices rose last month, the department said, but food companies aren't yet passing on the price increases to consumers. Corn prices rose 22.7 percent and soybeans were up 10.9 percent. But beef and veal costs, which can rise when feed grains are more expensive, fell by 5.8 percent, the Labor Department said.
With unemployment high and the economy weak, retailers won't risk chasing away frugal shoppers by raising prices.
Gas prices rose by 9.8 percent, the most since January. The cost of diesel and home heating oil also rose.
With prices largely in check, the Federal Reserve said earlier this month that it will purchase $600 billion in government bonds over the next 8 months in an effort to lower longer-term interest rates. Some critics have charged that the program could push inflation higher.
When it announced the program, the Fed said "measures of underlying inflation are somewhat low" compared to levels it considers consistent with price stability.