Producer Price Index shows jump in inflation
August 17, 2005
The Labor Department reported on Wednesday that the Producer Price Index was up by 1 percent in July, representing the biggest jump in wholesale price inflation since last October. The core rate, which excludes energy and food prices, was also up, by 0.4 percent, its biggest increase since January, and well above the retail core rate rise of 0.1 percent in July.
Energy price increases were a driving force in the higher inflation in July. Energy prices as a whole on the wholesale level were up 4.4 percent in July, after having risen only 2 percent in June. Gasoline prices rose 10.9 percent, the biggest gain since they increased by 12.8 percent last October. While analysts said that consumers should look for another rise in gasoline prices in August, they still believe that rising oil prices will not send the United States into a recession as they did in the 1970s and 1980s because circumstances are different now than they were in the past.
Their reasoning is that the price rises now are coming at a time when inflation in other sectors is well in control, so that the Federal Reserve will not feel the need to raise interest rates sharply as they did then. For example, the Producer Price Index showed that wholesale food prices were down for the fourth month in a row in July, a drop of 0.3 percent coming on decreases in the prices of beef, fruits, and fresh vegetables.