Wholesale prices rise moderately in November

Wholesale prices outside the volatile food and energy categories rose modestly last month due to a large increase in the cost of new cars.

But there was little sign of inflation in the report, which showed that the weak economy is keeping prices in check.

The Labor Department said Tuesday that the Producer Price Index, which measures price changes before they reach the consumer, rose by 0.8 percent in November. That's the biggest rise in 8 months.

But most of that rise was driven by a sharp increase in energy prices, particularly a 4.7 percent rise in the cost of gasoline.

Food prices rose by 1 percent, led by a 13.6 percent increase in the cost of fresh fruit and melons. Egg prices jumped by 22.7 percent. Some of those increases could start to show up on grocery store shelves, but many food companies will simply absorb the higher costs, economists said.

"We haven't seen a lot of that passed on to the consumer so far," said Bricklin Dwyer, an economist at BNP Paribas.

Rising food and energy costs have pushed up the producer price index by 3.5 percent in the past 12 months.

Excluding the volatile food and energy categories, so-called "core" producer prices rose by only 0.3 percent in November. In the past year, the core index has increased by only 1.2 percent, the smallest 12-month change since the year ending in June.

The price of new cars rose by 1.7 percent last month, a rebound from a steep fall of 3 percent in the previous month. Car prices dropped sharply in October's producer price index due to the introduction of new model cars and trucks. When car companies add new features to the new models without significantly raising prices, it shows up as a price drop under the department's calculations.

Core producer prices fell by 0.6 percent in October, mostly because of the impact of the new cars and trucks, the biggest drop in more than four years.

The sluggish economy is limiting the ability of many companies to raise prices. High unemployment is keeping paychecks low, so consumers can't afford to spend much more.

Retailers and manufacturers "don't have much pricing power at the moment," said Paul Dales, an economist at Capital Economics. "If prices go up, then consumers may just stop spending."

With prices largely in check, the Federal Reserve has launched a program to purchase $600 billion in government bonds in an effort to lower longer-term interest rates. Critics have charged that effort could lead to high inflation, as the central bank pumps more money into the economy.

But the Fed is more worried about deflation, a widespread drop in prices and wages, than inflation. When it announced the program, the Fed said "measures of underlying inflation are somewhat low" compared to levels it considers consistent with stable prices.

Fed Chairman Ben Bernanke and his colleagues are holding their final meeting of the year Tuesday. No changes in policy are expected.