Wholesale prices rose by a modest 0.3% in August, the Labor Department reported today, but analysts said the first rise in three months did not signal a return to a high rate of inflation.
The rise was mostly due to a 1.3% gain in food prices, the third increase in the last four months. That was in turn partially offset by a 1.5% drop in energy and gasoline costs. Excluding the two, prices rose by a scant 0.1%.
“The report for August certainly does not justify the fears that have been running rampant on financial markets,” commented Allen Sinai, chief economist with Shearson Lehman Bros. “Neither the food price bulge nor the energy price declines will persist.”
It was the first rise in the producer price index since May, when it rose 0.6%. The index, which has declined 1.8% over the last 12 months, fell by 0.4% in July.
In a separate report released by the Commerce Department, retail sales rose an estimated 0.8% in August, the fifth consecutive monthly gain, and 3.4% higher than a year ago.
Over-the-counter sales were stronger last month than they have been since April, when the commercial transaction index rose by 0.9%.