Wholesale Prices Increase 1.1% During October : Economy: Not counting a rise in energy prices, the ‘core’ rate of inflation--which some say is a more accurate barometer of the future--was unchanged from September’s levels.

Pushed by another big jump in oil prices, wholesale prices surged by a surprising 1.1% in October, intensifying concern about the impact of inflation on the fast-weakening economy, the government reported Friday.

The October increase, the third month in a row that this key inflation index has surged by 1% or more, brought the rise in the department’s overall producer price index so far this year to an annual rate of 7%--the steepest such gain since 1981.

But at the same time, analysts said the increases appear to be confined almost entirely to the energy sector and have not begun to “ripple” to prices of other goods or to wages--a move that could set off a wage-price spiral similar to the one in the 1970s.

With the rise in energy prices excluded, the closely watched “core” rate of inflation--which some analysts believe is a more accurate barometer of what lies ahead--was unchanged from September’s levels.

“It’s definitely not a replay of the ‘70s,” said Donald Ratajczak of Georgia State University in Atlanta, who is a specialist in price movements. “Then, if the price of oil kicked up, you also kicked up wages and spending programs.”

Analysts said the stability of the underlying inflation rate--combined with the threat to economic growth posed by the continuing rise in energy prices--is likely to intensify pressure on the Federal Reserve Board to ease interest rates soon.

Donald Straszheim, chief economist at Merrill Lynch Capital Markets in New York, said the central bank could ease credit as early as next Tuesday, when its policy-setting Federal Open Market Committee meets to review overall money and credit policies.

“To me, the time for Fed ambiguity on easing is past, because there is no danger of inflation and the economy is unambiguously falling--at this point sharply,” Straszheim said.

Irwin L. Kellner, economist at Manufacturers Hanover Trust Co. in New York, agreed. “The problem is not inflation but deflation,” he said. Commodities are down. Gold is down. Real estate is down. Many more things are falling in price than rising.”

That view apparently was shared in the financial markets, where stock prices rose sharply Friday as investor expectations that the Fed might lower interest rates sparked a rally in the stock market. The Dow Jones industrial index rose 44.80 points to close at 2,488.61.

Meanwhile, oil prices fell nearly 5% Friday as traders sold off contracts on rumors that Iraqi President Saddam Hussein had been overthrown, even though the State Department said it had received no such reports.

Crude energy prices rose 18.9% in October, spurred by a huge 29.5% increase in crude petroleum, reflecting the temporary surge in spot oil prices above $40 a barrel several days last month. Oil prices have surged sharply since Iraq invaded Kuwait last Aug. 2.

But analysts noted that even with the October jump in energy prices that the department reported Friday, the overall oil-price surge appears to be abating. Energy prices had risen 13.6% in September and 9.5% in August.

Food prices at wholesale rose 0.9% in October, offsetting a similar-sized decline the previous month. Analysts said the volatility reflected adjustments in herds by beef and hog producers in anticipation of higher consumption.