Inflation at the wholesale level surged by the largest amount in more than 30 years in November, reflecting higher prices for gasoline and a host of other items.
The Associated Press reported that the Labor Department said Tuesday (Dec. 19) the producer price index, which measures inflation pressures before they reach the consumer, was up 2% last month, the biggest advance since a similar increase in November 1974.
Economists had been expecting a rebound in wholesale prices following two months of big declines. However, the 2% jump was four times bigger than the 0.5% increase they had forecast. Even excluding volatile energy and food prices, core inflation posted a 1.3% advance, biggest jump in 26 years.
The report on wholesale prices was in stark contrast to last week’s report that consumer prices were flat in November, the third straight month of price relief at the retail level.
The big difference was energy costs, which fell in the consumer survey but were up 6.1% in the November survey of wholesale prices.
The rise in wholesale energy costs was led by a 17.9% jump in gasoline prices, biggest increase since June 2000. Natural gas for home use, home heating oil and diesel fuel costs all posted big gains at the wholesale level as well.
The performance of wholesale prices was certain to raise concerns about whether more price pressures are in the pipeline. Federal Reserve officials last week left interest rates unchanged at their final meeting of the year but said they continued to be worried about inflation pressures.
The 2% rise in wholesale inflation followed four straight months of benign readings, including outright big declines of 1.3% in September and 1.6% in October.
In those months, energy prices were falling sharply, a situation that reversed in November.