Wholesale prices surged 3.6 percent last year,
the biggest increase in a decade, despite a moderation in price
pressures in December, the government said Friday.
The Labor Department reported that its producer price index,
which measures inflation pressures before they reach the consumer,
was unchanged in December despite the fact that natural gas prices
soared by a record 6.9 percent last month.
The unchanged figure for wholesale prices overall in December
was a better-than-expected showing. Many analysts had been looking
for an increase of 0.3 percent because of the steep rise in natural
However, gasoline costs and home-heating-oil prices actually
fell last month, helping to offset the big jump in natural gas
bills. Homeowners in many parts of the country were shocked with
$200-plus natural gas bills in December.
The 3.6 percent rise in wholesale prices followed a 2.9 percent
increase for 1999 and was the worst showing for this inflation
gauge since a 5.7 percent rise in 1990.
Consumer prices have also accelerated this year but economists
have not sounded overall inflation alarms because much of the
deterioration is occurring because of the steep run-up in world
energy prices, something they do not expect to see repeated in
The Federal Reserve last week announced a surprise one-half
percentage point cut in a key interest rate. It was the biggest
reduction in eight years and was seen as a signal that the central
bank planned to aggressively fight a dramatic slowdown in economic
Some analysts have expressed fears that America's record nearly
10-year-long economic expansion could be in danger of toppling into
a recession but other economists say they believe the Fed is acting
in time to avert a recession.
A second report Friday showed that retail sales in December
managed to post a tiny, 0.1 percent gain. That bettered
expectations that sales would plunge by as much as 0.5 percent
because of the disappointing Christmas sales season.
Sales at auto dealers rose by 0.3 percent. However, analysts
cautioned that much of that gain could reflect price increases,
which are not factored out of the retail sales report. Wholesale
prices of both cars and light trucks posted big increases in
Outside of food and energy, wholesale prices were up a more
modest 1.2 percent in 2000, only a slight deterioration from a 0.9
percent rise in all of 1999.
Most economists are forecasting that inflation at both the
consumer and wholesale levels will show significant moderation in
2001 as a two-year surge in energy costs levels off.
For all of 2000, energy prices jumped by 17.1 percent following
an even bigger 18.1 percent rise in 1999. Energy prices had fallen
11.7 percent in 1998 as U.S. consumers benefited from the Asian
currency crisis, which plunged 40 percent of the globe into
recession and resulted in a sharp drop in energy demand.
For December, overall energy prices at the wholesale level fell
by 0.7 percent as the prices of gasoline dropped by 8.4 percent,
the biggest decline since July, while home-heating-oil costs fell
by 1.2 percent.
The record 6.9 percent rise in natural gas prices surpassed the
previous record of a 6.4 percent gain in June.
Wholesale natural gas prices have quadrupled from December 2000
compared with December 1999 to $10 a thousand cubic feet. In
California prices have spiked to seven times that amount on
occasions, adding to that state's electricity woes.
Food prices fell by 0.4 percent last month, reflecting a big
drop in vegetable prices.
Outside the volatile food and energy sectors, the "core" rate
of inflation at the wholesale level was up 0.3 percent in December
as the price of alcoholic beverages jumped by 1.2 percent, the
biggest gain since May.
Prices were also up for prescription drugs, up 0.6 percent, and
new passenger cars, which rose by 0.5 percent.