Wholesale prices jumped last month at the fastest pace in more than 15 years, the government reported yesterday, fanning concerns that growing inflation pressures will drive more businesses to raise consumer prices.
The Labor Department said its producer price index rose 1.9 percent in September, the biggest monthly increase since January 1990. The PPI measures prices paid to producers of finished goods that are ready for retail sale to consumers.
Much of the PPI's rise reflected the change in energy prices, which surged 7.1 percent last month, the biggest increase since October 1990. But farmers, manufacturers and other producers also charged higher prices for food, clothing, new autos, floor coverings, jewelry and other consumer goods.
Wholesale and retail prices for oil, gasoline, natural gas, diesel fuel and other energy items soared in September after hurricanes Katrina and Rita shut down and damaged oil platforms, refineries and pipelines along the Gulf Coast.
But consumer inflation remained tame outside of energy in September, the Labor Department reported Friday. That indicated that many businesses absorbed higher energy costs rather than passing them on to consumers through higher retail prices.
That may not last if energy and other business costs keep rising as they did last month, analysts said.
The recent storms also closed petrochemical plants and disrupted commercial shipping systems throughout the Gulf Coast region. That helped drive up prices for many "intermediate goods" -- such as plastics, fertilizers, asphalt and steel mill products -- which are used by producers to make finished goods. Prices shot up for building materials, such as plywood, cement and softwood lumber, as contractors prepared for the federal government and private insurers to pay tens of billions of dollars to rebuild in the Gulf Coast region, the Labor Department reported yesterday.
Prices also rose sharply for many crude goods -- unprocessed items such as raw cotton, coal and scrap metals -- the department said.
"All this inflationary pressure is likely to feed through" to the prices of finished goods, Jason Schenker, an economist with Wachovia Corp. Economics Group, wrote in an analysis of the price report. Then, he said "it will either squeeze manufacturers' profit margins or seep into consumer inflationary data."
Federal Reserve officials have been raising short-term interest rates for more than a year to keep inflation in check. They indicated last month that additional rate increases are likely but have not said for how long.
Schenker said, "If energy price increases do not prove to be a transitory blip, inflationary fears are likely to increase and Fed hikes are likely to continue."