Wholesale Prices Soar in Dec., With Cigarettes Leading the Way

U.S. wholesale prices shot up at the sharpest rate in 15 months during December, the Labor Department said late Tuesday, largely because of a big jump in tobacco prices.

In a report issued by mistake a day early on the Internet, the department said the producer price index increased 0.4% last month, after a 0.2% drop in November. That was the largest monthly gain since a matching 0.4% increase in September 1997.

Energy prices fell 2.3% in December, and food prices edged 0.1% lower. Goods other than food and energy, so-called core prices, rose 1% in December, the most in 12 years. However, excluding tobacco, they fell 0.1%.

It was the biggest rise in core prices since an identical 1% jump in October 1986. The last time there was a bigger monthly increase was in January 1981, when it climbed 1.1%.

But analysts discounted the significance of the sharp spike upward in monthly prices, noting that it was heavily influenced by a 30.7% increase in cigarette prices.

For all of 1998, producer prices were down 0.1% on top of a big 1.2% drop in 1997, the biggest yearly decline in 11 years. The back-to-back annual declines in producer prices were the first since the government began compiling the wholesale prices gauge in 1947, a department official said.

Analysts were caught by surprise by the early release of the data, which was not scheduled to be published until early today. A department official blamed it on a computer error rather than a human mistake, as was the case when the department similarly issued October employment figures early on Nov. 5.

Separately, the National Assn. for Business Economics said Tuesday that Asia’s economic troubles probably will linger until 2000 or later and will contribute to a significant slowdown in the U.S. economy this year.

A survey of 130 NABE members said a rebound in capital spending late in 1998 helped offset the squeeze on manufacturers from a sharp drop in exports to Asia. But it said profits got pinched for the third straight quarter at the end of 1998 and predicted heightened cost-cutting efforts ahead.