Nov 9, 2000 - 08:52 AM

Wholesale Prices Up 0.4 Percent, but 'core' Inflation Falls By Jeannine Aversa Associated Press Writer

WASHINGTON (AP) - Wholesale prices climbed by 0.4 percent in October, boosted by a big jump in residential natural gas prices and the largest increase in food costs in six months. The seasonally adjusted advance in the Producer Price Index, which measures inflation pressures before they reach store shelves, came after wholesale prices soared by 0.9 percent in September, mostly reflecting surging oil prices, the Labor Department reported Thursday.

Even though inflation was more subdued in October, the advance in wholesale prices was bigger than the 0.2 percent rise many analysts were anticipating.

Yet, outside the volatile energy and food categories, the "core" rate of inflation at the wholesale level fell by 0.1 percent in October, reflecting sharp declines in the prices of cars and trucks.

That decline marked a much better performance than the 0.1 percent rise many analysts were expecting. In September, the core rate rose 0.3 percent.

In another report, the number of Americans filing new claims for state unemployment insurance last week jumped by a seasonally adjusted 35,000 to 344,000, its highest level since early January 1999.

A government analyst blamed temporary layoffs in the automobile industry for most of the rise.

The more stable four-week moving average of claims edged up to a more modest 317,250. Claims have been creeping up in recent months, suggesting that the nation's red-hot labor market may be cooling a bit.

The Federal Reserve has boosted interest rates six times since June 1999 to slow the economy and keep inflation under control. Given signs that the Fed's rate increases are working, many analysts believe the central bank will leave interest rates unchanged at their Nov. 15 meeting as well as for the rest of the year.

One of the Fed's chief concerns has been that the tight labor market may lead to inflationary wage boosts as employers struggle to recruit and retain workers. Healthy wage growth is good for workers but economists worry that too-big increases could be passed along to consumers in the form of sharply higher product prices.

On the inflation front, wholesale prices so far this year have been rising at an annual rate of 4.1 percent, compared with a 2.9 percent gain for all of 1999. The pickup in this year's wholesale prices largely reflects rising energy costs.

In October, energy prices rose by 1.4 percent after a 3.7 percent jump in September.

A 5.2 percent increase in residential natural gas prices, the biggest rise since June, led the way in October's advance in overall energy prices. Residential electric prices rose 0.8 percent.

But costs for gasoline and heating oil fell 1.8 percent and 3.4 percent respectively last month.

Crude-oil prices have risen sharply this year as the Organization of Petroleum Exporting Countries limited production and U.S. supplies shrank.

Food prices rose 0.8 percent in October, the biggest increase since April and twice the 0.4 percent rise registered the month before.

Prices rose for eggs, beef, fruits and vegetables, swamping declining prices for dairy products.

Elsewhere in the report, car and truck prices declined sharply in October. Car prices declined 1.8 percent, the biggest drop in 10 years. Truck prices decreased 1.2 percent, the largest decline in three years.

Prices for prescription drugs rose 1.6 percent in October, the biggest rise since March 1998. Economists say increased demand and the introduction of more expensive new drugs have boosted prices.

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-- Carl Jenkins (somewherepress@aol.com), November 09, 2000