WASHINGTON – Wholesale prices climbed by 0.5 percent in November -- an improvement compared with the previous month's surge, but still fresh evidence that inflation is picking up as the economy gains momentum.
The increase in the producer price index, reported by the Labor Department (search) on Friday, came after wholesale prices shot up by 1.7 percent in October, the biggest rise in more than 14 years.
The reading in November on the PPI, which measures the costs of goods before they reach store shelves, showed a bigger advance than the tiny 0.1 percent rise that economists were forecasting. A big jump in residential natural gas prices along with some food products, such as fish, played a big role in lifting overall wholesale prices last month.
Excluding energy and food costs, which can swing widely from month-to-month, "core" wholesale prices rose by just 0.2 percent in November, the smallest increase in four months.
The latest snapshot of inflation added to the case that Federal Reserve Chairman Alan Greenspan and his colleagues will raise short-term interest rates again next week.
Wanting to make sure inflation doesn't become a danger to the economy, the Federal Reserve has boosted short-term interest rates four times this year. Analysts expect another quarter-point rate increase when the Fed meets on Dec. 14. Such a move would leave a key rate at 2.25 percent.
The economy's soft patch in the spring and early summer had helped to keep wholesale prices relatively well behaved. Now with the economy expanding solidly, inflation probably will pick up as well, economists said. A weaker U.S. dollar also can put pressure on prices of imported goods, which gives U.S. producers more room to raise prices.
In November, energy prices rose by 1.8 percent, following a jump of 6.8 percent in October. Last month's increase was led by a 6.2 percent rise in residential natural gas prices, the biggest gain since March 2003. Residential electric power prices and costs for liquefied petroleum gas, such as propane, also went up. But prices for gasoline and home-heating oil both declined.
Oil prices, which hit a record high of just over $55 a barrel in late October, have moderated, helping to provide some price relief. Oil prices are now hovering at more than $42 a barrel.
Food prices, meanwhile, rose by 0.4 percent in November. That was down from a 1.6 percent advance in October as hurricanes that ripped through the Southeast disrupted supplies.
In November, fish and shellfish prices went up by 8.4 percent, the most since April 2003. Dairy products rose by 1.8 percent, the largest since May. Vegetable prices increased 4.4 percent, while fruit prices plunged by 17 percent.
Elsewhere in the report: prices for household furniture last month rose 1.1 percent, the most since October 1993. Prices for passenger cars went up 0.6 percent, while costs for light motor trucks fell by 0.5 percent. Costs for computers dropped by 3.1 percent, the most since February 2003.