Whole­sale prices jump in Oc­to­ber

Un­der­ly­ing in­fla­tion­ary pres­sures still tame

The Reporter (Lansdale, PA) - - BUSINESS - By Christo­pher Ru­gaber

WASH­ING­TON >> Led by costlier gas, food and chem­i­cals, U.S. whole­sale prices surged 0.6 per­cent in Oc­to­ber, the big­gest month-tomonth rise in six years. Yet ex­clud­ing items that tend to fluc­tu­ate sharply from month to month, in­fla­tion pres­sures re­main tame.

The jump in the pro­ducer price in­dex, which mea­sures prices be­fore they reach con­sumers, fol­lowed a smaller 0.2 per­cent in­crease in Septem­ber. Com­pared with 12 months ear­lier, pro­ducer prices rose a sharp 2.9 per­cent in Oc­to­ber.

But when food, en­ergy and other volatile cat­e­gories are ex­cluded, so-called core whole­sale prices rose only a mod­est 0.2 per­cent in Oc­to­ber and 2.8 per­cent from a year ear­lier.

Higher prices for ser­vices such as trans­porta­tion and ware­hous­ing drove most of Oc­to­ber’s over­all in­crease in whole­sale prices. Many truck­ing com­pa­nies have had to pay bonuses and raise pay to hire enough truck driv­ers, for ex­am­ple.

And the year-over-year in­crease in whole­sale prices is still lower than it was in the sum­mer, when it topped 3 per­cent. In ad­di­tion, oil prices de­clined in Oc­to­ber, which will likely lower gaso­line costs in the com­ing months.

“There is lit­tle sign that a more

marked ac­cel­er­a­tion (in in­fla­tion) lies around the cor­ner,” Andrew Hunter, U.S. econ­o­mist at Cap­i­tal Economics, a fore­cast­ing firm, said in a re­search note.

Econ­o­mists say the Trump ad­min­is­tra­tion’s trade war with China, which has led it to im­pose tar­iffs on $250 bil­lion of Chi­nese im­ports, has so far

had only a lim­ited im­pact. Hunter sug­gested that the dol­lar’s rise in value this year, which makes im­ports less ex­pen­sive for Amer­i­cans, might be off­set­ting much of the im­pact of the tar­iffs.

Whole­sale prices for pork rose by the most in more than two years last month. But Stephen Stan­ley, chief econ­o­mist at Amherst Pier­pont, said that likely marked a snap­back af­ter China im­posed re­tal­ia­tory tar­iffs on U.S. pork

ear­lier this year. Those tar­iffs ini­tially de­pressed China’s pur­chases and forced pork farm­ers to lower their prices. That trend now ap­pears to be re­vers­ing it­self, Stan­ley said.

The Fed­eral Re­serve is keeping a close eye on price changes as it mon­i­tors the econ­omy for signs of over­heat­ing. The un­em­ploy­ment rate is at a fivedecade low of 3.7 per­cent, and com­pa­nies are rais­ing wages and salaries to at­tract and keep work­ers.

Aver­age hourly pay rose in Oc­to­ber from a year ear­lier at the fastest pace in nearly a decade.

Com­pa­nies may have to raise prices to offset the costs of higher pay, which could spur higher in­fla­tion. But busi­nesses could also in­vest in more ma­chin­ery and soft­ware to make their em­ploy­ees more ef­fi­cient, which would en­able them to pay more with­out rais­ing prices.

Fed pol­i­cy­mak­ers fin­ished a two-day meet­ing

Thurs­day with­out chang­ing the short-term in­ter­est rate they con­trol. But most econ­o­mists ex­pect the Fed will hike short-term rates for a fourth time this year when it next meets in December. The Fed has sig­naled it ex­pects to raise rates three more times next year.

Af­ter its meet­ing Thurs­day, the Fed is­sued a state­ment that sug­gested it saw lit­tle sign that in­fla­tion would ac­cel­er­ate beyond its 2 per­cent tar­get. Con­sumer

prices rose 2.3 per­cent in Septem­ber from a year ear­lier.

Fri­day’s re­port showed that whole­sale gas prices rose 7.6 in Oc­to­ber and food costs in­creased 1 per­cent. The price of new cars fell 0.7 per­cent, as au­tomak­ers in­tro­duced their new car mod­els last month. Newer cars typ­i­cally in­clude ad­di­tional fea­tures and the govern­ment re­flects that by low­er­ing its mea­sure of auto prices.


Toma­toes go through a wash­ing process at the Los Gatos Tomato Prod­ucts plant in Huron, Cal­i­for­nia.

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