Wholesale prices rise moderately in NovemberWASHINGTON (AP) — Wholesale prices outside the volatile food and energy categories rose modestly last month due to a large increase in the cost of new cars.
WASHINGTON (AP) — Wholesale prices outside the volatile food and energy categories rose modestly last month due to a large increase in the cost of new cars.
But there was little sign of inflation in the report, which showed that the weak economy is keeping prices in check.
The Labor Department said Tuesday that the Producer Price Index, which measures price changes before they reach the consumer, rose by 0.8 percent in November. That's the biggest rise in 8 months.
But most of that rise was driven by a sharp increase in energy prices, particularly a 4.7 percent rise in the cost of gasoline.
Food prices rose by 1 percent, led by a 13.6 percent increase in the cost of fresh fruit and melons.
Excluding the volatile food and energy categories, so-called "core" producer prices rose by only 0.3 percent. In the past year, the core index has increased by only 1.2 percent, the smallest 12-month change since June.
The price of new cars rose by 1.7 percent in November, a rebound from a steep fall of 3 percent in the previous month. Car prices dropped sharply in October's producer price index due to the introduction of new model cars and trucks. When car companies add new features to the new models without significantly raising prices, it shows up as a price drop under the department's calculations.
The sluggish economy is limiting the ability of many companies to raise prices. High unemployment is keeping paychecks low, so consumers can't afford to spend much more.
With prices largely in check, the Federal Reserve has launched a program to purchase $600 billion in government bonds in an effort to lower longer-term interest rates. Critics have charged that effort could lead to high inflation, as the central bank pumps more money into the economy.
But the Fed is more worried about deflation, a widespread drop in prices and wages, than inflation. When it announced the program, the Fed said "measures of underlying inflation are somewhat low" compared to levels it considers consistent with stable prices.
Fed Chairman Ben Bernanke and his colleagues are holding their final meeting of the year Tuesday. No changes in policy are expected.