Wholesale inflation jumps by largest amount in 6 months, reflecting higher energy costs
Martin Crutsinger, AP Economics Writer
Thursday February 19, 2009, 8:53 am EST
WASHINGTON (AP) -- Inflation at the wholesale level surged unexpectedly in January, reflecting sharply higher prices for gasoline and other energy products.
The Labor Department said Thursday that wholesale prices increased by 0.8 percent last month, the biggest gain since last July and well above the 0.2 percent increase that economists had expected.
The acceleration was led by a 3.7 percent surge in energy prices with gasoline prices jumping by 15 percent, the biggest gain in 14 months.
Even outside the volatile food and energy sectors, wholesale prices showed a bigger-than-expected increase, rising by 0.4 percent. Economists had expected a slight 0.1 percent rise in so-called core inflation.
Food prices were well-behaved last month, falling for a second straight month. The 0.4 percent decline in January reflected lower costs for beef and dairy products which offset gains in the price of vegetables and chicken products.
In addition to the big jump in gasoline costs, prices for home heating oil were up by 5.4 percent and liquefied petroleum gas, which is often used to heat homes in rural areas, surged by 20.2 percent, the biggest jump in more than six years.
Outside of food and energy, there were increases for pharmaceuticals, light trucks and passenger cars and civilian aircraft.
Despite the big jump in wholesale prices in January, economists do not believe inflation is on the verge of becoming a problem, given the country's deep recession.
That downturn, which began in December 2007, has been keeping a lid on inflation pressures, which has given the Federal Reserve the room to slash a key interest rate to nearly zero without having to worry about kindling inflation.
Federal Reserve Chairman Ben Bernanke told an audience at the National Press Club on Wednesday that he saw little risk that the Fed's efforts to fight the recession and a severe financial crisis would trigger inflation presusres.
He said that once the economy begins to rebound and financial markets stabilize, the Fed will be able to quickly reverse the actions it has taken before inflation becomes a problem.
Source: http://finance.yahoo.com/news/Wholesale-inflation-takes-apf-14410311.html
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1 comment:
Okay, I really don't get this one. The Federal Government has been Bailing our Every Tom, Dick and Harry over the past few months. Furthermore they have been printing paper like it's going out of style and yet the reporters at the AP news service would have us to believe that Inflation was unforseen? Come on people wake up and smell the Bantha Fodder. Government has been doing anything and everything they can to prevent "DEFLATION". That means printing worthless greenbacks just as fast as they can. However, there is some good news folks according to the last sentence of the article "the feds will be able react quickly before inflation is a real problem". I am a little confused? Maybe someone can help me out? At what point does worthless paper become worth something again? Can you say re-instate the gold standard? After all that is what brought us out of the first "Great Depression"
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