Wholesale Prices Surge; Economists Urge Calm
New government figures show wholesale prices rose at a higher-than-expected rate of two percent last month. The data has raised new questions in the financial markets about inflationary pressures on the economy.
The financial markets hate inflation. They also hate sudden and unexpected changes in economic conditions. So investors were caught off guard Tuesday morning by news that a key inflation measure rose at its fastest rate in three decades last month. But economists said the report probably overstated the real inflation threat.
The Labor Department said the producer price index rose by two percent last month. That was partly because energy prices rose. But even when food and fuel costs were excluded, the increase was still 1.3 percent -- the biggest jump since the last days of the Carter administration.
Those are big increases, but several economists said the numbers were probably somewhat distorted. They noted that the index had fallen or stayed flat throughout much of the fall. So, they said, it was probably playing catchup.
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