020340 Wholesale Prices Rise; Beef & Veal Up

Washington - Higher costs for gasoline and some food items lifted wholesale inflation by a modest 0.2 percent in February, the government reported.

The advance in the Labor Department's producer price index, which measures prices paid to factories, farms and other producers, came after a tiny 0.1 percent rise in January.

Excluding energy and food prices, the "core" rate of inflation was flat in February after edging down 0.1 percent the month before. That indicated prices outside those two volatile sectors remain under control.

For the 12 months ending in February, wholesale prices fell by 2.6 percent as the weak economy forced companies, coping with sagging sales, to either cut prices or keep a lid on increases. Declining wholesale prices have squeezed companies' profits, which really took a hit during the slump.

Wholesale prices, which had been falling since October, rose in the last two months. One of the biggest factors in this rise is higher energy prices. Crude-oil prices have firmed as oil-producing nations cut production.

In February, energy prices rose 0.4 percent, following a 0.1 percent advance in January. Gasoline prices led last month's advance, increasing 4.5 percent, the largest gain since September.

Heating oil prices rose 2.8 percent in February and prices for liquefied petroleum gas, such as propane, rose 1.7 percent. However, prices for natural gas and electric power for homes fell by 1.6 percent and 0.3 percent, respectively.

Prices for food rose 1 percent in February, on top of a 0.8 percent advance. Higher prices for vegetables, fish, beef and veal swamped lower prices for eggs, fruits and diary products.

Elsewhere in the report, prices for new cars fell 0.2 percent in February, prices for sanitary paper products dropped 0.9 percent and book-publishing costs fell 1.3 percent.

But prices for light trucks, such as SUVs, rose 0.6 percent in February, the biggest gain since July.

The long period of well-controlled inflation allowed the Federal Reserve to slash short-term interest rates 11 times last year to stimulate economic growth.

The Fed, citing signs of a recovery, opted to leave rates unchanged in January and many economists expect the central bank to do the same when it meets next week. With the economy rebounding, some economists project the Fed may need to raise rates later this year if growth is so robust as to threaten a bout of inflation.

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