Inflation Soars in September

Wholesale prices jumped 1.9 percent in September, the Labor Department reported today, the sharpest monthly surge in 15 years. The culprit was soaring energy prices.

Prices for energy-related goods advanced 7.1 percent, compared with a 3.7 percent increase in August. The price of natural gas led the way with a startling 9 percent rise.

The cost of eggs for fresh use spiked 49.3 percent -- a record -- after falling 24 percent a month earlier.

The rate of inflation for goods other than food and energy rose 0.3 percent, following no change the month before. This so called "core rate" of inflation, while mild compared to energy-related costs, was also beyond the projections of many economists.

While the overall trend was not a surprise, the actual rate of increase exceeded the expectations of most analysts and reinforced the view that the Federal Reserve is likely to continue raising benchmark interest rates incrementally as it has for the past year.

On the other hand, energy prices have fallen in October, holding out the possibility that inflation could slow during the month.

The release of the monthly Producer Price Index, which reflects prices charged by domestic producers of finished goods and services, came as Federal Reserve Chairman Alan Greenspan warned that global economic growth will be slowed by the increase in energy prices caused by hurricanes Katrina and Rita.

"Although the global economic expansion appears to have been on a reasonably firm path through the summer months, the recent surge in energy prices will undoubtedly be a drag from now on," Greenspan said in his first public comments about the storms' economic effects.

The Fed chairman, speaking to Japanese executives in Tokyo today, echoed the forecasts of many analysts, who have predicted that higher energy costs will force many consumers to curtail spending on other items and may cause some businesses to shelve expansion and hiring plans.

Consumer prices rose 1.2 percent last month and 4.7 percent in the 12 months that ended in September, according to the Labor Department's consumer price index released last week. That was the biggest monthly advance since March 1980, and the steepest annual rise since May 1991.

The CPI increase primarily reflected energy prices, which rose 12 percent last month -- the biggest monthly increase since the government began collecting such data in 1957.

Energy prices have been rising for more than two years as the global demand for oil has grown and supplies have remained tight. Prices spiked in September after the Gulf Coast hurricanes shut down and disabled oil rigs, refineries and pipelines. Much of the lost production has been restored. Meanwhile, the government warned last week that high natural gas prices will push household heating bills up this winter.