Producer price index increases

Journal Record, The (Oklahoma City), Dec 13, 1999

WASHINGTON (AP) -- Inflation at the wholesale level edged up 0.2 percent in November, pushed by the biggest jump in natural gas prices in two years. Outside of energy, prices were well-behaved, economists said.

The advance Friday in the Labor Department's Producer Price Index, which measures inflation pressures before they reach the consumer, followed a 0.1 percent decline for October.

"Aside from energy, prices for everything else look tame," said Donald Ratajczak, director of Georgia State University's economic forecasting project. "This report should calm any fears about inflation."

So far this year, wholesale prices have been rising at an annual rate of 2.9 percent, compared with no change for all of 1998. The pickup has been coming from big increases in energy costs, which had declined for much of 1998.

Not counting the volatile energy and food categories, the "core" rate of inflation at the wholesale level was flat in November, better than many analysts expected. In October, the core rate had risen 0.3 percent.

"We continue to enjoy a very favorable -- low and stable -- price climate," said Ken Mayland an economist with KeyCorp.

Many economists believe the Federal Reserve will leave interest rates unchanged at its next meeting on Dec. 21, citing concerns about problems that may arise from the Y2K computer changeover. Friday's inflation report would support a Fed decision to stay on the sidelines. Still, economists expect the Fed, which has raised interest rates three times this year to slow the sizzling economy and keep inflation under control, will raise rates again early next year because of continuing strong growth.