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December wholesale prices rise

Wholesale prices rose by 0.3 percent in December, mostly reflecting higher costs for gasoline and other energy products. Even with the advance, the latest snapshot of the nation's pricing climate suggested that inflation remains under control.
/ Source: The Associated Press

Wholesale prices rose by 0.3 percent in December, mostly reflecting higher costs for gasoline and other energy products. Even with the advance, the latest snapshot of the nation's pricing climate suggested that inflation remains under control.

The modest increase in the Producer Price Index came after wholesale prices retreated by 0.3 percent in November, the Labor Department reported Wednesday. The PPI measures prices before they reach store shelves.

Excluding energy and food prices, which can swing widely from month to month, "core" wholesale prices dipped by 0.1 percent in December for the second month in a row. This indicated that the economy's resurgence isn't fanning an unwanted bout of upward spiraling prices.

The increase in the overall PPI was slightly faster than the 0.2 percent rise that economists were forecasting. But the performance of the core inflation was more subdued than the 0.1 percent rise that analysts expected.

For the 12 months ending December, wholesale prices rose 4 percent, while core prices went up by just 1 percent during the same period.

Federal Reserve Chairman Alan Greenspan, in a speech Tuesday, said inflation remains subdued even as the dollar has fallen by roughly 25 percent against major foreign currencies since early 2002.

"Inflation, the typical symptom of a weak currency, appears quiescent," he said. "Certainly euro area exporters have been under considerable pressure," he said. The euro has surged in value against the U.S. dollar, making U.S. goods more competitive in foreign markets and European goods less competitive.

Economists say the strengthening U.S. economy and the weaker dollar are beginning to give some companies a little more pricing power.

Because inflation has been tame and the labor market is still struggling to get on a firm footing, the Federal Reserve has leeway to hold a main short-term interest rate at a 45-year low of 1 percent at its next meeting on Jan. 27-28, economists say.

After three month of price declines , energy prices rose by 1.8 percent in December, the largest increase since June.

Gasoline prices were up 5.1 percent last month, liquefied petroleum gas, such as propane, increased 10.9 percent, home heating oil rose 6.4 percent and residential electric power prices advanced 0.5 percent.

Food prices, meanwhile, rose 0.2 percent in December, following a 0.3 percent decline. Higher prices for fruits and vegetables offset lower prices for beef and veal, and pork.

Elsewhere in the report: Computer prices dropped by 1.9 percent last month, prices for men's and boy's clothes fell 0.8 percent and car prices rose 0.2 percent.