Producer Prices Jump in November

U.S. wholesale prices jumped 0.5% in November, reflecting the biggest jump in natural gas costs since March 2003 and raising some concerns about inflation pressures.

But a separate report showed that consumer confidence rose this month, in part because relatively few wholesale price increases are hitting shoppers.

The increase in prices paid to factories, farmers and other producers was lower than the 1.7% gain in October, the Labor Department said Friday, but was higher than the 0.1% analysts had expected.

The core rate, which excludes food and energy, was up 0.2%.

So far this year, producer prices are rising at a 5.3% annual rate, compared with a 4.1% increase at the same time last year. Core prices are up at a 2.2% annual pace, compared with a 1.2% gain a year earlier.

Even so, higher materials prices so far have been more of a strain on corporations than consumers. Auto parts supplier Delphi Corp. on Friday cited rising costs as one reason it would cut 8,500 jobs next year.

“We are seeing a rise in raw-materials costs and commodities, but companies haven’t been able to pass these through to consumers,” said Mark Vitner, economist at Wachovia Corp. in Charlotte, N.C. “That’s a threat to profit margins, and as a result companies are having to cut costs.”

The prices report would reinforce the Federal Reserve’s view that it needs to continue raising interest rates, although without a sense of urgency, said Joel Naroff, president of Naroff Economic Advisers. “They feel that the pressures are slowly building,” he said.

Fed policymakers meet Tuesday and are expected to raise their benchmark short-term rate from 2% to 2.25%, the fifth increase this year.

Consumers have grown more confident this month even with higher rates looming. The University of Michigan’s preliminary consumer sentiment index for December rose to 95.7 from 92.8 in November, according to a report issued Friday. Economists had expected a reading of 93.5.

The report’s current-conditions index, which reflects Americans’ perception of their financial situation and whether it’s a good time to buy big-ticket items, rose to 106.8 from 104.7 in November.