Prices at the wholesale level posted their biggest increase for the year in December, the government said Thursday, as surging energy prices jolted an otherwise calm inflation report.
The Labor Department said the producer price index rose 0.5% last month, the biggest monthly increase since December 1995's gain of 0.6%. The index rose 0.4% in November.
But excluding food and energy prices, the "core" rate of inflation rose by a scant 0.1% in December, matching November's rise. That helped ease investors' fears of a pickup in inflation and sparked a rally in the bond market that spilled over into stocks.
"It's hard to remember any time when the overall economic situation looked so good," Federal Reserve Board Vice Chairman Alice Rivlin said in a speech Wednesday night in New York. The economy is showing "no clear signs of overheating or serious imbalance," she said.
But another economist predicted that the spike in energy prices could continue to bedevil the inflation outlook.
"We should expect to see energy-consuming companies attempting to restore diminished profit margins by lifting product prices," said Ken Maynard, chief economist at KeyCorp in Cleveland.
Still, with inflation concentrated in the energy sector, the Fed is "likely to practice forbearance for a while longer," Maynard said. The central bank has held rates steady since cutting them last January.
Wall Street economists had forecast a 0.3% rise in wholesale prices overall and a 0.1% rise in the core rate.
In another report Thursday, the department said first-time jobless claims fell 13,000 to 361,000 in the week ended Jan. 4 from a revised 374,000 the prior week.
The less volatile four-week moving average rose to 357,250 from 354,500.
For all of 1996, producer prices rose 2.8%, compared with 2.3% in 1995. But excluding the volatile food and energy components, prices rose only 0.6% last year, the second-smallest gain on record.
(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)
Producer Price Index
Index of finished-goods prices, seasonally adjusted. 1982=100