- The Washington Times - Thursday, March 15, 2007

Inflation at the wholesale level soared in February, pushed higher by gasoline and other energy prices and the largest increase in food costs in more than three years.

The Labor Department reported yesterday that wholesale prices surged 1.3 percent last month. That was the biggest increase since November and more than double the 0.5 percent gain analysts expected.

Cost pressures also showed up in higher prices for cigarettes, alcoholic beverages, appliances and children’s toys and games, which rose at the fastest clip in more than two decades.

The core inflation rate, which excludes food and energy, climbed by 0.4 percent, more than forecast and double the January gain.

The worrisome inflation news comes as the economy struggles to deal with the effect of a steep slump in housing and widespread layoffs in autos and other manufacturing industries.

Normally, the Federal Reserve would consider cutting interest rates to bolster a faltering economy. But analysts said the increased inflationary pressures make rate cuts highly unlikely when the central bank meets next week.

“There is still a degree of inflation in the economy and that supports the Fed’s policy of not easing in response to the softer economic data we have been seeing,” said Robert Dederick, chief economist at RGD Economics, a Chicago consulting firm.

The 1.3 percent jump in wholesale prices followed a 0.6 percent decline in January and was the biggest increase since a 1.5 percent surge in November.

The February increase factored in a 3.5 percent spike in energy costs as the price of gasoline, home heating oil and natural gas shot up.

Wholesale gasoline prices were 5.3 percent higher in February; more increases are expected as the spring driving season gets under way.

The latest Lundberg Survey found that the nationwide average price for regular gasoline has risen 20 cents in the past two weeks to $2.55 per gallon.

Food costs jumped 1.9 percent in February, the third straight month of sizable increases. The February advance reflected harsh winter weather that sent the price of such crops as celery, strawberries and oranges soaring.

The cost of toys and games rose by 2.3 percent, the biggest increase since February 1983. Cigarette prices rose by 4.6 percent and light trucks, the category that covers sport utility vehicles, were up 1.7 percent.

February’s big price jump meant wholesale inflation had risen by 2.5 percent over the past 12 months. It was the fastest pace since a 3.8 percent increase for the 12 months ending last August, a period when energy prices were surging.

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