WASHINGTON – Sharp gains in the cost of cigarettes and autos helped push core producer prices (search) up at their fastest rate in six years in January, while overall prices also edged higher, the Labor Department (search) said Friday.
The producer price index (search), which measures prices received by farms, factories and refineries, moved up 0.3 percent in the month, the department said. But the core index, which strips out volatile food and energy prices, shot up 0.8 percent, the biggest gain since December 1998.
Wall Street economists had forecast a 0.2 percent gain in both overall and core producer prices, but some had changed their view after the department issued revised figures for prior months earlier this week.
The numbers are likely to fan inflation concerns and could bolster a growing expectation that the Federal Reserve (search) will keep raising interest rates well into 2005.
Energy prices tumbled 1 percent, building on a sharp fall in December, and food costs slipped 0.2 percent.
However, prices received for cigarettes jumped 3.4 percent, the biggest gain since April 2002. A department analyst said the rise may have partly reflected a shift in the cost of maintaining a farmer's minimum guaranteed price for tobacco from government to industry.
Auto costs, which had dropped in December, rose 1.2 percent, while prices of light trucks and SUVs climbed 0.9 percent. Vehicle prices have been volatile due to on-again, off-again sales incentives from automakers.