WASHINGTON – Inflation at the wholesale level rose by 0.4 percent last month, the biggest increase in three months, as the price of energy and food products shot upward, the government reported Tuesday.
The increase in the Labor Department's (search) Producer Price Index (search) followed a 0.3 percent increase in January and an actual decline of 0.3 percent in December. It was the biggest jump since a 0.6 percent surge last November.
The price pressures were generally confined to food and energy. Outside of those areas, the so-called core rate of inflation rose a much more moderate 0.1 percent in February, a big improvement from January when core wholesale inflation had jumped by 0.8 percent, the worst showing in six years.
The Federal Reserve (search) was meeting Tuesday and was widely expected to increase interest rates by a quarter-point, the seventh such increase since last June. The Fed has been gradually raising rates to make sure that a rebounding economy does not generate unwanted inflation.
So far, the rate increases have come at a moderate pace as Fed officials believe that they can move at a measured pace because inflation, outside of energy, is well-behaved.
However, oil prices hit record levels last week, raising new worries that a fresh round of surging energy prices could trigger a breakout of inflation in other areas.
The report on wholesale prices showed that the new round of increases in energy prices was already being felt in February with a 1.4 percent jump in energy costs, the biggest advance since a 2.8 percent price surge in November. Energy prices had fallen in both December and January.
The energy price increase was led by a 5.2 percent spike in gasoline prices, the biggest increase since a 12.8 percent rise last October. Liquefied petroleum gas, used to heat homes, and home heating oil also showed increases in February.
Food prices also showed big increases in February, rising by 0.8 percent after having fallen by 0.2 percent in January. It was the biggest one-month gain since a 1.5 percent surge last October, which was blamed on hurricane damage to crops in Florida.
For February, the biggest food increase was a 105 percent rise in the wholesale price of cauliflower followed by increases of 75 percent in the price of tomatoes, a 71 percent jump in broccoli prices and a 79 percent increase in corn prices. The price of eggs rose by 24.4 percent, the biggest one-month jump in nearly four years.
Outside of food and energy, the small 0.1 percent rise in core inflation reflected big declines of 0.9 percent in the price of passenger cars and a 2.8 percent drop in the price of light trucks.
These price declines were offset somewhat by a 1.3 percent increase in the price of alcoholic beverages, a 0.6 percent increase in cigarette prices and a 1.1 percent increase in the cost of cosmetics.