Gas prices push whole inflation rate up - East Valley Tribune: Business

Gas prices push whole inflation rate up

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Posted: Thursday, June 14, 2007 6:56 am | Updated: 6:48 pm, Fri Oct 7, 2011.

WASHINGTON - The biggest jump in gasoline prices in six months helped push inflation at the wholesale level higher in May although inflation outside of energy remained well-behaved.

The Labor Department reported that wholesale prices rose by 0.9 percent last month, worse than the 0.6 percent advance that analysts were expecting. The price surge was led by a 10.2 percent jump in gasoline prices, the biggest one-month increase since last November.

However, food prices declined for the first time in seven months and, outside the volatile food and energy sectors, core inflation posted a moderate 0.2 percent increase. That was slightly better than the 0.3 percent advance that analysts were expecting.

In other economic news, the Labor Department reported that claims for unemployment benefits totaled 311,000 last week, unchanged from the previous week.

That was a better outcome than the small rise in claims that analysts had been expecting and supported the view that the job market has held up remarkably well in the face of a yearlong economic slowdown that saw growth slow to a barely discernible rate of 0.6 percent in the first three months of this year.

Analysts believe the economy staged a significant rebound in the spring despite a continuing severe downturn in housing. They are forecasting that growth in the nearly completed April-June quarter will be around 3 percent.

In its latest snapshot of economic conditions around the country, the Federal Reserve found rising momentum, led by a rebound in manufacturing and continued strength in consumer spending. Retail sales shot up by 1.4 percent in May, a better-than-expected rebound from April's lackluster performance.

The 0.9 percent rise in the department's Producer Price Index marked the fourth consecutive hefty increase in this gauge which measures cost pressures before they reach the consumer. Wholesale prices had risen by 0.7 percent in April and were up by 1 percent in March and 1.3 percent in February.

However, the price pressures have been largely contained to the energy sector and there have been encouraging signs that this year's surge which pushed gasoline pump prices to record highs is beginning to abate.

While Fed Chairman Ben Bernanke has continued to say the biggest threat to the economy is inflation, the central bank is expected to keep the rates it controls unchanged when it meets at the end of the month. Many analysts say they expect no Fed moves on interest rates for the rest of the year.

For May, energy prices jumped by 4.1 percent, reflecting big increases in gasoline and liquefied petroleum gas.

Wholesale food prices in May edged down 0.2 percent, the first decline since a 0.4 percent drop last October. The May drop reflected big decreases in the price of lettuce, tomatoes, cauliflower and other vegetables.

Outside of food and energy, the 0.2 percent rise in core inflation followed two months when core prices showed no change at all. The Fed is closely watching core prices at both the wholesale and consumer levels to determine whether the surge in energy prices is beginning to spread to other sectors of the economy.

In the core categories, new car prices fell 0.2 percent in May after an even bigger 1 percent drop in April. Computer prices were down 2 percent last month.

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