Wholesaler prices rose sharply for the second consecutive month, as farm prices alone leaped 3 per cent in November, the government reported yesterday.
But the overall wholesale price index rose 0.7 per cent as the farm price increase was moderated by a 0.4 per cent rise in industrial commodities prices, according to figures released by the Department of Labor.
Economists consider changes in industrial prices to be a more reliable inded of inflation trends than changes in farm prices, because farm prices rise and fall erratically.
The 3 per cent jump in farm prices follows a 2.4 per cent rise in October.
Most of last month's increase occurred among farm products that consumers do not eat such as animal feedgrains (which rose 16.7 per cent and hay and oilseeds (which jumped 8.4 per cent).
As a result, according to Commerce Department chief economist Courtenay Stater, the sharp rise in farm costs may not show up quickly or fully in prices on the supermarket shelves.
The White House found all elements of the November wholesale price report encouraging - both the continuing slowdown in industrial prices, which rose 0.8 per cent in September and 0.6 per cent in October, and the rise in farm costs.
Presidental press secretary Jody Powell said the report is "on the whole encouraging."
Powell said that the big increase in farm prices was "probably desirable" because farm prices have been depressed recently. He noted that these "increases do not translate directly to higher food prices."
While there have been two consecutive months of big increases at the farm level farm prices tumbled sharply between May and September, falling as much as 6.9 per cent in June alone.
Farmers are upset by the low return they have been receiving on their output and some farm organizations have threatened to strike. In recognition that record crops would drive down farm prices, Congress last summer voted large increases in crop price support."
But some farmers say that is not enough and a delegation is expected to arrive in Washington Saturday to complain. Powell told reporters he did not know if White House officials would see any of the farmers.
The wholesale price index is based on a simple of about 2,700 different farm and industrial commodities. Wholesale prices are prices businessmen charge each other for products.
The index stood at 196.3 per cent of its 1967 average last month. That means a selection of commodities which cost $100 in 1967 cost $196.30 in November. While all percentage changes adjusted to account for normal seasonal variations in prices, the index itself is not.
Over the last three months wholesale prices have been rising at an annual rate of 8.3 per cent, while industrial prices have been increasing at a 7.3 per cent pace.
The index of finished goods, which approximates the makeup of the Labor Department's consumer price index, rose 0.4 per cent. The finished goods index had risen 0.8 per cent in October, but otherwise had risen moderately or not at all since June.
While grains and hay rose sharply other food groups fell or rose more moderately. Fruits and vegetables rose 0.9 per cent as did livestock, while poultry prices fell 2.7 per cent and fluid milk prices declined 1.3 per cent.
Among industrial prices, fuels, surged 1.1 per cent, but lumber prices fell 0.5 per cent and paper prices declined 0.3 per cent. A special industrial price index that factors out fuel prices rose 0.3 per cent, after a 0.7 per cent rise in October and a 0.6 per cent rise in September.
Julius Shiskin, commissioner of labor statistics, said that the November wholesale price report, despite the big slowing in industrial prices, suggests that inflation remains on the 6 to 7 per cent track it has been on for several years.