Washington – Wholesale inflation jumped by the largest amount in 15 years in September, and there are worrisome signs that soaring energy prices from the hurricanes are beginning to spill over to the rest of the economy.
Prices at the wholesale level rose 1.9 percent, the biggest increase since the Persian Gulf War in 1990. Like the 1.2 percent September jump in consumer prices announced last week, the biggest in 25 years, the surge was led by energy costs reflecting the widespread shutdowns of production following Hurricanes Katrina and Rita.
But the report on wholesale prices raised more worries than the leap in consumer prices. That’s because it showed that outside of food and energy, price pressures were increasing. The so-called “core rate” of wholesale inflation rose by 0.3 percent last month after no change in August.
Of 30 nonfood consumer goods tracked, 20 posted price increases and only two – soaps and toys – showed price declines, a marked turnaround from earlier, when most categories were showing declines.
Among the big price increases were 1.1 percent for women’s apparel, 0.9 percent for passenger cars and 1 percent for heavy trucks.
“Slowly, but inexorably, inflationary pressures are building across the economy,” said Joel Naroff, chief economist at Naroff Economic Advisors, a private consulting firm.
The worry is that a sharp jump in energy prices will begin to put pressure on products outside of energy. That could prompt the Federal Reserve to accelerate its interest-rate increases in an effort to slow the economy as a way of curbing inflation.
However, if tight global supplies keep energy prices high, the inflation pressures might intensify even as the economy is slowing, pushing the country into “stagflation” – stagnant growth and rising inflation – something not experienced in America since the oil shocks of the 1970s and early 1980s.
