|
Producer price surge biggest in 15 years Original Source Link: (May no longer be active)
http://reuters.myway.com/article/20051018/2005-10-18T130154Z_01_KWA846583_RTRIDST_0_NEWS-ECONOMY-DC.htmlhttp://reuters.myway.com/article/20051018/2005-10-18T130154Z_01_KWA846583_RTRIDST_0_NEWS-ECONOMY-DC.html
Producer price surge biggest in 15 years
Oct 18, 9:01 AM (ET)
By Tim Ahmann
WASHINGTON (Reuters) - U.S. producer prices shot up by an unexpectedly large 1.9 percent last month, the biggest gain in more than 15 years, as energy costs surged in the wake of hurricanes that devastated the U.S. Gulf Coast, a government report showed on Tuesday.
However, outside of volatile food and energy costs, prices received by farms, factories and refineries were relatively restrained, advancing just 0.3 percent, the Labor Department said.
Prices for U.S. government bonds and stock futures fell, while the dollar strengthened, as the report kept alive concern in financial markets over inflation and interest-rate hikes from the Federal Reserve.
Wall Street economists had expected producer prices to rise just 1.1 percent, with prices outside of food and energy up a tame 0.2 percent.
Analysts were divided on the degree to which the higher costs producers face from energy prices would feed through to the prices consumers pay.
Energy prices at the producer level soared 7.1 percent in September, the biggest jump since October 1990, while food prices gained 1.4 percent, the largest increase in nearly a year.
"The real question is whether companies will squeeze their (profit) margins as costs increase or if they are going to increase prices," said Michael Metz, chief investment strategist at Oppenheimer Holdings Inc. in New York. "I think they will increase prices."
Fed officials, who have raised overnight borrowing costs from a 1958 low of 1 percent to 3.75 percent in 11 straight quarter-point steps, are widely expected to bump rates up again when they meet in two weeks in an effort to ensure sharp energy price gains do not feed into more broad-based inflation.
Over the past year, producer prices have increased a hefty 6.9 percent on the back of rising energy costs, the biggest 12-month gain since the period ended November 1990. In contrast, so-called core prices have gained just 2.6 percent.
Consumer prices have also jumped. They posted a 4.7 percent gain in the 12 months through September, the biggest jump since 1991.
U.S. crude oil prices hit a record high of $70.85 a barrel in the immediate aftermath of Hurricane Katrina, which slammed into the Gulf Coast on August 29.
Prices have moved down since and settled at $64.36 a barrel on Monday, although Hurricane Rita, which came ashore in late September, kept much of the region's oil-producing and refining capacity shuttered.
The department said the two storms did not impact its data collection.
Gasoline prices increased 12.7 percent in the wake of the hurricanes, natural gas costs climbed 9 percent, liquefied petroleum gas prices soared 24.7 percent and home heating oil prices rose 4.8 percent, the department said.
Prices for cars rose 0.9 percent in September and prices for light trucks and SUVs gained 0.5 percent.
Fed Chairman Alan Greenspan said on Monday that while surging energy prices would weigh on growth and foster inflation pressure, it was unlikely to have the type of impact previous oil price shocks have had.
So far, U.S. consumers have appeared resilient in the face of higher energy costs.
The International Council of Shopping Centers and UBS said in a joint report on Tuesday that U.S. chain store sales rose 0.4 percent in the week ended October 15, the fourth straight gain.
(Additional reporting by Chris Arena in New York)
|
|
