Producer Prices Post Biggest Jump in 2 Years

Big cost increases for gasoline, pork and citrus fruit in January added up to the largest rise in prices charged by factories, refineries and food-processing plants in more than two years, the government said Thursday.

The Labor Department’s producer price index began the year by jumping 0.5%, the most since October 1996, after edging down 0.1% for all of 1998.

However, much of the rise in prices for finished goods last month was concentrated in a few items and should not draw an interest rate increase from the inflation-wary Federal Reserve.

Prices excluding the volatile food and energy components actually fell for the first time in seven months, edging 0.1% lower. And analysts believe inflation in prices paid by consumers will rise only modestly this year, about 2.5%, compared with a 12-year low of 1.6% last year.

Prices charged by food producers rose 1.6% last month, the most in nearly six years, after slipping 0.1% during 1998. Energy prices jumped 1.8%, the most in two years, but they fell 12.1% last year.

Meanwhile, the Labor Department said first-time applications for unemployment checks barely budged last week, staying at a level signaling healthy demand for labor.

State unemployment offices received a seasonally adjusted 288,000 claims for benefits, up from 284,000 the week before. A four-week moving average of claims, which smooths weekly fluctuations in the volatile data series, fell from 298,750 to 292,000, the lowest in 10 years.

A separate report showed that business at Philadelphia-area factories expanded at a faster pace in February, a sign the region’s manufacturing economy is stabilizing after contracting in the final four months of 1998.

The Federal Reserve Bank of Philadelphia’s general economic index rose to 15.9 in February from 12.4 in January. Analysts had expected an index of 11.1 this month.