Wholesale price index shows jump in inflation

August 18, 2005|Associated Press

WASHINGTON -- Inflation at the wholesale level increased by the largest amount in nine months in July, reflecting the hit consumers are taking at gas pumps.

The Labor Department reported that its Producer Price Index, which measures price pressures before they reach the consumer, jumped by 1 percent in July, the biggest advance since a 1.5 percent increase last October.

The report on wholesale prices depicted many of the same price pressures shown in the 0.5 percent increase in consumer prices reported on Tuesday. However, the wholesale report showed that the core rate of inflation, excluding energy and food, rose by 0.4 percent in July, the biggest increase since January.

Core inflation at the retail level rose by a much more modest 0.1 percent in July. The biggest difference in the two reports was in the measurement of new car prices.

Car prices fell by 1 percent in the report on inflation at the consumer level, the biggest one-month decline in 30 years, while car prices were up 1.5 percent in the wholesale price report.

The wholesale price report caught the introduction of attractive incentive offers in June while the consumer report did not pick up those incentives until the July report.

The jump in car prices accounted for about half of the increase in core inflation in the July PPI report.

Gasoline prices were up 10.9 percent, the biggest surge since a 12.8 percent rise in October. Analysts caution that motorists should be braced for another large increase in costs in August, reflecting the fact that gasoline prices have continued to rise in recent weeks.