February Wholesale Prices Jump Sharply : Commerce: Hike of 0.4% is sharpest in more than two years. Fuel, tobacco and new cars are cited as major contributors to increase.
Prices paid by wholesalers jumped 0.4% in February, the sharpest in more than two years, the government said Friday.
Analysts were expecting a milder 0.3% rise in the Labor Department’s producer price index, which measures prices paid to producers such as factories and farms.
For the first two months of the year, producer price inflation was running at a 3.4% annual rate, more than double the 1.6% price rise registered for all of last year.
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In February, large seasonally adjusted increases for home heating oil, gasoline, tobacco and new cars more than offset declines in the prices of fruits and vegetables.
The increase was the largest since an identical rise in November, 1990, early in the recession. After that, the slow economy dampened demand, keeping a lid on prices.
Excluding the volatile food and energy categories, which jump around from month to month, the core rate of inflation rose 0.3% after a 0.4% increase in January.
In a separate report Friday, the Commerce Department said businesses managed to keep inventories stable in January despite business sales slipping 0.2% in January, the first decline in five months.
Most analysts believe that inflation will remain moderate this year, along with economic growth, but some are now cautioning that inflation won’t improve as had been expected.
“We’re starting to see the first signs of at least some acceleration of inflation from the economic expansion. . . . At best we’ll be stable on consumer inflation this year . . . and next year we’ll start to accelerate moderately,” said economist David Jones of Aubrey G. Lanston & Co., a New York securities dealer.
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Economist Donald Ratajczak of Georgia State University said a moderate spurt of inflation is a natural reaction when solid economic growth resumes after a recession. But it need not continue all year, he said.
“This isn’t unusual in the early phases of an economic upturn. When the economy is very weak, people sell some goods at below cost. When the economy improves, the first thing they try to do is push them up to the break-even level. After that, things tend to calm down, and that’s what we’re hoping will happen,” he said.
Economist Robert Brusca of Nikko Securities Co. International Inc. said some prices, particularly for fuel oil, which surged 18.5%, were affected by a cold snap that hit most of the country.
He said inflation should be held in check in part because economic growth so far this year is slower than before Christmas.
In February, overall energy prices rose 1.7%, the biggest increase in eight months. Gasoline prices rose 2.6%. The cost of residential gas and electricity both declined.
Food prices edged down 0.1%. Vegetable prices dropped 4.7% after a 19.2% decline the month before. Fruit prices were down 1.9%.
However, prices rose for pasta, chickens, fish and roasted coffee.
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New car prices were up 0.6%, and tobacco costs were up 1%. Prices also rose for cosmetics, appliances, furniture and men’s and boys’ clothing. Prices moved down for alcoholic beverages, books and luggage.
The various changes left the producer price index for finished goods at 124.3% of its 1982 base of 100.
The price of intermediate goods jumped 0.5%, the worst since June, and crude goods fell 0.5%. Excluding food and energy, crude prices increased 2.2% in February after a 3.1% gain in January.
