020243 Wholesale Prices Increase; Food Prices Up

Washington - Wholesale inflation edged up 0.1% in January reflecting higher prices for gasoline, cars and some food products.

The tiny advance in the Labor Department's producer price index, which measures price paid to factories, farms and other producers, came after wholesale prices had plunged by 0.6% in December, the government reported Friday.

Excluding energy and food prices, the "core" rate of inflation fell by 0.1% in January, after being flat in December.

The latest PPI figures represented a better reading on inflation at the wholesale level than many analysts were expecting. Many had forecast a 0.2% rise in overall wholesale prices for last month and a 0.1% advance in the core rate.

Forecasters had expected overall wholesale prices to show a rise for last month because energy prices -- while still moderate -- had crept up.

Crude-oil prices firmed up somewhat in January as oil-producing nations cut production. Still, prices have largely stayed within the same broad range since November.

In the report, the government said that overall energy prices rose a slim 0.1% in January, after dropping by 3.9% the month before.

The slight increase in crude-oil prices was responsible for lifting gasoline prices.

The report showed that gasoline prices in January rose 3.4% and heating oil went up 4.9%. Prices for liquefied petroleum gas, such as propane, increased 9%, the largest advance since October 2000. Residential natural gas prices rose 1.7%, the biggest rise in a year. But prices for residential electric power fell a record 1.4%.

Food prices, meanwhile, rose 0.8% in January, after being flat in December. Higher prices for eggs, vegetables, chickens, fish and dairy products outweighed lower prices for beef, veal and fruits.

Elsewhere, new-car prices rose 0.7% in January, the largest gain in four months, as some incentives and discounts waned. But prices for light trucks, including SUVs, fell 0.6%.

For all of last year, wholesale prices plunged 1.8%, the biggest drop in 15 years, squeezing some producers but benefiting consumers in the ailing economy.

Because of the tame inflation environment, the Federal Reserve was able to cut interest rates 11 times last year, in an effort to lift the economy out of recession. Last month, the Fed opted to leave interest rates unchanged and cited signs of a recovery as the basis for its decision.

Many economists predict the Fed's aggressive rate-cutting will pave the way for solid economic growth in the second half of this year. In the meantime, analysts expect companies will continue to find it difficult to raise prices, which should keep inflation in check in the coming months.

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