WASHINGTON (AP) --Wholesale prices bolted ahead in May at the fastest pace in six months as energy and food costs marched higher.þþThe Labor Department reported Tuesday that its Producer Price Index, which measures the costs of goods before they reach store shelves, shot up 1.4 percent in May. That was up from a modest 0.2 percent rise in April and marked the biggest increase since November.þþHowever, stripping out energy and food prices, which can swing widely from month to month, the ''core'' rate of inflation rose 0.2 percent in May, an improvement from the prior month's 0.4 percent increase. That suggested that other prices were fairly well behaved.þþThe overall inflation rate of 1.4 percent was higher than the 1 percent rise many economists were forecasting. But the increase in core prices matched their expectations.þþMeanwhile, a report from the Federal Reserve showed that industrial production dipped in May, underscoring the strain on factories from the deep housing slump. Output at the nation's factories, mines and utilities fell 0.2 percent in May, following a 0.7 percent decline in April.þþThe latest report on manufacturing activity disappointed economists. They were forecasting a tiny 0.1 percent rise in overall production.þþIn other economic news, the Commerce Department reported that the number of new housing projects started in May fell by 3.3 percent as builders pulled back further given the market's deep slump.þþAnd, the broadest measure of trade, called the current account deficit, increased to $176.4 billion in the first quarter, up from $167.2 billion in the final quarter of last year.þþEnergy prices jumped 4.9 percent in May, also the biggest rise since November. Diesel fuel prices galloped by 11.2 percent, gasoline prices were up by 9.3 percent and home heating oil increased by 8 percent.þþFood prices also rose sharply. They increased by 0.8 percent in May, after being flat in April.þþIn May prices for pork went up 8 percent, the most since September 1999. Prices for fruits and melons rose 5.9 percent, the most since December. Prices for beef and veal, natural cheese and certain confectionary goods also posted sizable increases.þþThere are fears that eventually these energy and food costs will force companies to boost prices for lots of other goods and services, spreading inflation through the economy.þþGiven those concerns, many economists believe the Federal Reserve will hold interest rates steady at 2 percent, a four-year low, when its meets next week.þþFed Chairman Ben Bernanke and his colleagues have signaled that the Fed's rate-cutting campaign, started last September to shore up economic growth, was over because of growing concerns about inflation.þþWall Street investors and some others predict the Fed will have to boost rates later this year to ward off an inflation flare-up. Others, however, believe the Fed will leave rates alone through the rest of this year. Raising rates too soon, they said, will hurt the fragile economy, which has pounded by housing, credit and financial problems.þþSoaring energy and food prices are walloping consumers and businesses alike.þþLast week, the government reported that consumer prices leaped by 0.6 percent in May, the biggest increase in six months. Those higher prices also are cutting into workers' paychecks -- further straining budgets.þþBusinesses, meanwhile, also are tightening the belt. Employers have cut jobs every month so far this year. That's pushed the nation's unemployment rate up to 5.5 percent in May, from 5 percent in April -- the biggest one-month rise in two decades.þþWholesale prices are rising faster than consumer prices because businesses -- for competitive or other reasons -- have been limited in their ability to pass along all of their higher costs from energy and other raw materials to customers.þþElsewhere in the wholesale inflation report, prices for light truck dipped 0.9 percent and prices for cars dropped 1 percent. Cigarette prices rose 2.5 percent and airplane prices increased 1.1 percent, the most since August 2004.þþ
Source: NY Times
