Core Prices at Producer Level Recede in October

U.S. wholesale prices rose in October amid climbing food and natural gas prices, the government said Thursday in a report that presented a mixed picture of inflation in the world’s top economy.

The Labor Department said its producer price index--a key measure of inflation at the wholesale level--rose 0.4%, less than half of September’s 0.9% increase, which was largely driven by a spike in energy prices.

But without the more volatile energy and food components, the so-called core PPI actually fell 0.1% in October after September’s 0.3% rise.

“Inflation at the producer price level is still tightly under wraps, despite today’s headline figure,” said Bill Cheney, chief economist at John Hancock Financial Services in Boston.

Economists polled by Reuters had expected both the overall and the core PPI to rise 0.1% in October.

The report showed that food prices--which account for almost a quarter of the overall index--rose 0.8%, while those of passenger cars fell 1.8%, the biggest drop in a decade.

Finished energy goods prices rose 1.4%, boosted by a 5.2% rise in residential natural gas. Gasoline prices fell 1.8% and heating oil prices eased 3.4%.

“It’s going to be a very expensive winter for a lot of people, with natural gas prices rising,” said Kevin Logan, senior economist at Dresdner Kleinwort Benson in New York.

Higher energy prices could keep a lid on consumer spending, helping to brake economic growth, which has already slowed to 2.7% in the July-September quarter from a scorching 5.6% in the second quarter of the year.

Economists had widely expected energy prices to settle down somewhat in October after crude oil prices fell 10% from the previous month on the back of increasing U.S. fuel inventories and the release of some oil from the nation’s emergency stockpiles.

Separately, the Labor Department said temporary layoffs in the auto industry drove claims for first-time unemployment benefits to 344,000 in the week ended Nov. 4, the highest level since early January 1999.

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Producer Prices

Index; 1982=100; seasonally adjusted:

October: 139.5

*

Source: Bureau of Labor Statistics