Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: WEDNESDAY, March 16, 1994 TAG: 9403160175
SECTION: BUSINESS PAGE: B-8 EDITION: METRO
SOURCE: Associated Press
DATELINE: WASHINGTON LENGTH: Medium
Wholesale prices shot up 0.5 percent, the biggest jump in 10 months, the Commerce Department said Tuesday. But it attributed the rise almost entirely to higher energy costs led by soaring heating oil prices as thermostats were turned up to ward off winter's chill.
``There's hardly any inflation there,'' said Michael Evans, head of Evans Economics of Boca Raton, Fla. ``The numbers were better than we expected. It's no secret: we had a cold winter. But the normal weather is back.''
He said the report should ease pressure on the Federal Reserve Board to push up interest rates at a meeting next Tuesday. The Fed nudged short-term rates up a quarter percentage point to 3.25 percent in February, the first increase in five years.
Economists said Tuesday that since crude-oil prices have dropped this month, volatile energy costs probably will decline in March as much as they rose in February.
``Critically, the core Producer Price Index edged up just 0.1 percent,'' said Bruce Steinberg of Merrill Lynch. That figure excludes food and energy prices.
``Inflation is still very much a toothless tiger,'' said Ron Schreibman of the National Association of Wholesaler Distributors. ``A bump up in rates now to head off inflation would be premature.''
The economy expanded at a sizzling 7.5 percent annual rate in the final three months of last year. Most forecasters predict growth will be about half that pace this year.
The Commerce Department said the February increase in wholesale prices was caused by a 2.8 percent increase for energy, the biggest advance since October 1990.
Heating-oil costs soared 23.5 percent, the steepest increase since August 1990. Residential gas prices were up 1.2 percent, and gasoline rose 6.3 percent.
If wholesale prices continued to rise at the February pace, it would give the country an inflation rate of 4.4 percent. Producer prices rose just 0.2 percent in 1993.
The government today releases its monthly Consumer Price Index. Many analysts, predicting a 0.3 percent rise after January's unchanged figure, expect consumer inflation to remain below 3 percent in 1994 for the third straight year.
In Tuesday's report, food prices dropped 0.4 percent, the biggest decline since June, after January's 0.3 percent decline.
Car costs, up sharply in January, rose only 0.2 percent last month. Tobacco products increased 0.6 percent.
by CNB