WASHINGTON – A key measure of wholesale inflation rose in July by the most in six months.
The measure, called core wholesale inflation, excludes volatile food and energy prices. It surged 0.4 percent last month.
But most economists say they aren't concerned about the increase. One reason is that it was driven largely by costlier tobacco products and pickup trucks, which economists say are probably one-time events.
Raw material prices also fell in July. Those figures should lead to lower wholesale prices in coming months.
And the costs of components are rising more slowly than the costs of the finished goods calculated in the inflation measure.
The Federal Reserve and private economists tend to focus on core inflation. It's seen as a better predictor of price changes than overall inflation is.
Higher wholesale prices tend to raise pressure on department stores, groceries and restaurants to pass along higher costs to consumers. But that will be difficult now at a time of high unemployment and stagnant wages, which have caused consumers to tighten spending.
Combined with falling oil and gas prices, lower consumer spending should slow inflationary pressures, economists say.
Wednesday's Labor Department report on the Producer Price Index reflects price changes in goods before they reach consumers. The overall index, which includes energy and food, rose 0.2 percent in July. That follows a 0.4 percent drop in June, the first decline in 17 months.
Gas prices fell for the second straight month. Food costs rose by the most since February.
Tobacco prices, which are affected by seasonal factors, jumped 2.8 percent. That was the largest increase in more than two years.
Truck prices rose 1 percent. But that mostly reflects supply shortages stemming from Japan's earthquake. The impact of those disruptions has started to fade, based on other figures.
"Overall, these data do little to alter our belief that most of the recent surge in core consumer price inflation is temporary and that it will fall back next year," said Paul Dales, senior U.S. economist with Capital Economics.
Over the past 12 months, the PPI has jumped 7.2 percent. That's up sharply from earlier this year, though below May's 7.3 percent rise, the biggest in 2½ years. The core index has risen 2.5 percent in the past 12 months, the most since June 2009.
On Thursday, the government will report on consumer prices for July. Economists predict that core consumer prices rose just 0.2 percent, half the increase in core wholesale prices.
Bricklin Dwyer, an economist at BNP Paribas, said a smaller increase in core consumer prices would suggest that retailers are reluctant to raise prices. That trend would help keep broader inflation in check.
Consumers are seeing some relief from high gas prices, which are expected to keep falling.
Earlier this year, food and gas prices spiked and caused the PPI to jump 1.5 percent in February, after a 1 percent rise the previous month.
Federal Reserve Chairman Ben Bernanke has faced criticism that the Fed's policies are contributing to higher inflation. The Fed has kept the short-term interest rate it controls at nearly zero since December 2008.
But gas prices fell from a peak in early May of nearly $4 a gallon to a nationwide average of $3.59 a gallon on Tuesday. Behind the drop is a decline in oil prices, which had spiked this spring because of turmoil in the Middle East.
Concerns about slower global economic growth have pushed oil prices down from about $97 a barrel a month ago to about $88.
Still, the 12-month increase in the core PPI is large enough to make it harder for the Federal Reserve to take further steps to boost the economy, analysts said, for fear of sparking more inflation.
Last week, Fed policymakers said they will keep its benchmark short-term rate at nearly zero at least until mid-2013. Previously, the central bank had never given a clear time frame. It hopes the certainty of low rates will encourage consumers and businesses to borrow and spend more.
The central bank forecast in June that inflation will remain within its informal target range of below 2 percent this year and next.