Producer prices, fueled largely by rising energy prices, rose 0.3 percent in December, boosting prices at the wholesale level to their highest annual increase in nearly a decade, the Labor Department reported yesterday.

When food and energy prices are excluded, however, the "core" rate for the government's producer price index, which rose 0.1 percent in December, was up only 0.9 percent for the year.

The December report on producer prices was generally in line with analysts' expectations and did not appear to prompt any new worries about inflation or rising interest rates.

The modest increase in the core inflation rate helped bolster the stock markets, with the Dow Jones industrial average up 31.33 points, reaching a new closing record of 11,582.43. The Nasdaq composite index closed up 107.24 after two days of retreat.

With food and energy costs included, the 3 percent inflation rate at the wholesale level for 1999 was the biggest annual increase since 1990, when producer prices rose 5.7 percent.

Meanwhile, the Commerce Department reported yesterday that retail sales in December were $259.6 billion, an increase of 1.2 percent from November and a 9.7 percent increase over December 1998. The sales increase was well above analysts' expectations.

Total sales for 1999 were $3 trillion, up 8.9 percent and the largest annual increase since 1984.

Sales of both durable and nondurable goods were strong in December, rising 1.1 percent and 1.4 percent respectively. For the year, durable goods--products expected to last three years or longer--rose 10.2 percent, with automobile sales up 10.9 percent for the year. Sales of nondurable goods rose 9.4 percent for the year. The Commerce Department report does not reflect price changes during the survey periods, just sales.

Labor Secretary Alexis Herman said: "The December PPI report suggests that the U.S. economy ends 1999 and starts the new millennium in balance. We are enjoying a combination of low unemployment, low inflation and high productivity growth."

The highly volatile price of finished energy goods such as gasoline and home heating oil rose 18.4 percent in 1999 and 1.2 percent for the month of December alone. But much of the price rise was gauged against a drop in energy prices the previous year because of the economic slump in Asia, which lowered worldwide demand. Energy prices are expected to level off this year.

The December price increases were largely within analysts' expectations. The consumer price index for December is scheduled to be released today. Both reports, along with the nation's employment picture, will be part of the mix of economic statistics the Federal Reserve Board will review early next month before making its decision on whether to raise interest rates.

The Labor Department also reported yesterday that the number of workers filing claims for unemployment insurance for December was unchanged at a seasonally adjusted 309,000. The report was a further sign of a continuing strong job market.

February will mark 107 months of continuous economic expansion, a new record for the nation. There was nothing in yesterday's batch of statistics to suggest a slowdown was imminent.


(This graphic was not available)


(This graphic was not available)