Higher food costs in September helped give wholesale prices their biggest increase since January, the government said Thursday, but economists said there is little threat of a jump in inflation.
The producer price index climbed 0.3% last month after falling 0.1% in August, the Labor Department said, the first increase since May and the largest since January, when the index rose 0.5%.
So far this year, the index, which measures prices charged by producers of finished goods, has risen at a modest seasonally adjusted annual rate of 1.7%--identical to its increase for all of 1994.
Despite the latest increase, which had been expected, economists said higher costs at the wholesale level are unlikely to be passed on to consumers.
"The pressure on retail prices from this is absolutely minimum," said economist Russell Sheldon of Mellon Bank in Pittsburgh.
Excluding the volatile food and energy components of the index, the so-called core rate of wholesale inflation rose only 0.2% last month after edging up 0.1% in August, the department said.
"We are simply not seeing any inflationary pressure," said Gene Sherman of M.A. Schapiro & Co.
In Las Vegas, Federal Reserve Board Gov. Janet Yellen said she expects inflation to remain under control, but said the central bank's policy-makers are ready to act if prices start to creep higher.
"Inflation will remain low and we will make further progress toward achieving price stability," she told business and community leaders. "However, whatever demand conditions materialize, the [policy-makers] will remain committed to taking whatever actions are necessary to keep inflation subdued."
In a separate report, the Labor Department said the number of workers applying for unemployment benefits for the first time rose slightly to a seasonally adjusted 348,000 in the first week of October, from 342,000 the prior week.
But the more stable four-week moving average of first-time jobless claims declined in the same period, to 347,750 from 351,750, the department said.
The reports follow recent indications that the economy is slowly regaining some of its momentum after growing at a meager 1.3% rate in the second quarter, its weakest quarterly performance in more than two years.
The department's report on the consumer price index for September, the most widely used measure of inflation, is due out today. Economists expect a small 0.2% rise.
Leading last month's increase in producer prices was a 1% jump in food costs, which had been unchanged in August but have risen 2.9% over the past year.
Prices of fresh and dry vegetables surged 38.6% in September after falling 12.7% in August.
"But that could be a consequence of the hot, dry summer," said economist David Sloan at consulting firm IDEA Inc. "I don't think it's something to be most concerned about."
Egg prices jumped 10.2% after a 0.9% gain, and prices of shortening, cooking oils and pasta products climbed last month after declining in August. Prices for turkey, pork, rice and processed fruits and vegetables all rose.
Prices of capital goods, or business equipment, rose 0.1% last month and 1.6% in the past year.
"I think the fact that capital equipment continues to be as well-behaved as it is, is an indication that at the core there really are not any inflationary pressures building," said economist Daryl Delano at Cahners Economics in Newton, Mass.
Prices of energy products fell 0.5% last month after a 0.9% decline in August, led by gasoline, which fell 2%. Home heating oil prices rose 0.9% and residential electric power costs slipped 0.4%.
Passenger car prices rose 0.5% in September after a 0.2% gain in August. Prices also accelerated for newspapers, prescription drugs, girls' clothing, furniture and floor coverings, the Labor Department said.
Overall the index stood at 127.9 last month, meaning that a basket of goods that wholesaled for $100 in 1982 costs $127.90 today.
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Index of prices for finished goods, seasonally adjusted: 128.1
Source: Bureau of Labor Statistics