- The Washington Times - Friday, January 13, 2006

ASSOCIATED PRESS

Soaring gasoline costs pushed inflation at the wholesale level up sharply in December, ending a year in which wholesale inflation rose at the fastest pace since 1990.

The Labor Department reported that its Producer Price Index, which measures price pressures before they reach the consumer, rose 0.9 percent in December, the biggest increase since a 1.7 percent jump in September.

The culprit in both months was a big surge in gasoline costs, which spiked above $3 per gallon in early September, reflecting lost Gulf Coast production following Hurricane Katrina.

For all of 2005, wholesale prices rose by 5.4 percent. That was the biggest increase since a 5.7 percent increase in 1990, and another year in which surging oil costs pushed inflation higher. However, core inflation, excluding energy and food, was up a more moderate 1.7 percent in 2005, including a tiny 0.1 percent increase in December.

In other economic news, retail sales posted a 0.7 percent increase in December after rising by 0.8 percent in November.

However, excluding autos, consumer spending at retail stores was up a much more modest 0.2 percent following a decline of 0.4 percent in November. Those figures were viewed as depicting a lackluster Christmas sales season.

The 0.9 percent increase in wholesale prices in December followed a 0.7 percent plunge in prices in November. Economists had been expecting a rebound last month, but the increase was more than double the 0.4 percent rise they anticipated.

The increase was expected to keep the Federal Reserve on a path of gradually moving interest rates higher to make sure that energy price pressures do not spill over into more broad-based inflation problems.

Analysts think the Fed will boost a key interest rate for a 14th time when officials next meet on Jan. 31, which will be Alan Greenspan’s last meeting as chairman.

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