Inflation worries hit U.S.

Wholesale prices jump 1.9 per cent Largest increase in more than 15 years

WASHINGTON— U.S. inflation at the wholesale level soared last month by the largest amount in more than 15 years, reflecting the surge in energy prices that occurred following the Gulf Coast hurricanes. The labour department reported that wholesale prices jumped 1.9 per cent in September, led by surging prices for gasoline, natural gas and home heating oil after the widespread shutdowns of refineries and oil platforms along the Gulf Coast. Food prices, which had been declining, posted the biggest increase in 11 months — 1.4 per cent — as the price of eggs shot up by 49.3 per cent, a record amount.

Excluding the volatile energy and food sectors, the so- called core rate of inflation also posted a worrisome increase of 0.3 per cent after showing no increase at all in August. The news on wholesale prices followed a report Friday that consumer prices had risen by 1.2 per cent in September, the biggest one-month increase in a quarter- century as gasoline prices at the pump climbed by a record 17.9 per cent.

While the core rate of inflation at the consumer level was wellbehaved, rising by a tiny 0.1 per cent, the worry is the sizable increases in energy will soon begin to spill over into more widespread inflation pressures. A number of U. S. Federal Reserve officials in recent weeks have expressed such concerns. In a speech in Tokyo yesterday, Federal Reserve chairman Alan Greenspan said the jump in energy prices ‘‘ will undoubtedly be a drag from now on.” Greenspan did not quantify how much of a slowdown will occur, but private economists are forecasting that the hit from hurricanes Katrina and Rita could shave as much as a full percentage point from economic growth in the final six months of this fiscal year.

Analysts believe the Federal Reserve Board, which boosted interest rates for an 11th time last month, will keep raising rates in November and December in an effort to keep the energy price surge from becoming embedded in more widespread inflation pressures. The 1.9 per cent jump in wholesale prices matched a similar rise in January 1990. The increase has not been surpassed since a 2 per cent jump in November 1974, a period when the country was coping with surging energy prices following the 1973 Arab oil embargo. Over the past 12 months, the produce price index, which measures inflation pressures before they reach the consumer, has risen by 6.9 per cent, the biggest 12- month change since a rise of 7 per cent in the 12 months ending in November 1990.

For September, energy prices jumped by 7.1 per cent, the biggest one- month gain since a 7.5 per cent rise in October 1990. The increase reflected a 12.7 per cent rise in the price of gasoline, a 9 per cent increase in natural gas and a 4.8 per cent increase in home heating oil.