Price Increases Held in Check by Plunging Costs for Energy

Falling energy costs tamed producer price inflation in November, despite a blip in new car prices and a weather-related jump in food costs.

Prices paid to goods producers such as farms and factories were unchanged last month after falling 0.2% in October, the Labor Department said Thursday.

It was the seventh consecutive month the producer price index either held steady or declined.

However, prices excluding the volatile food and energy sectors--the so-called core rate--rose 0.4% after falling 0.5% a month earlier.

Nevertheless, speculation is increasing that the Federal Reserve Board will seek to maintain low inflation with a small increase in short-term interest rates. Treasury Secretary Lloyd Bentsen all but conceded that will probably happen,

The Fed has held its benchmark federal funds rate at a three-decade low of 3% for 15 months. But now that economic growth is picking up, many analysts are looking for a quarter-point increase during the first three months of the year.

For the first 11 months of the year, producer prices increased at a meager 0.4% annual rate. Consumer inflation has been running just under 3% this year and last after a decade of fluctuating between 4% and 5%.

Meanwhile, in another report, the department said applications for unemployment insurance seesawed up by 13,000 last week to a seasonally adjusted 335,000. They had fallen by 17,000 the week before because the Thanksgiving holiday left the unemployed less time to file applications.