Producer prices surge Energy costs drive February wholesale prices up 1%, biggest jump since '90 March 16, 2000: 8:49 a.m. ET

NEW YORK (CNNfn) - U.S. producer prices posted their biggest monthly jump in almost 10 years in February, reflecting a surge in crude oil prices, the government reported Thursday. The core rate, which excludes volatile food and energy costs, advanced at a more moderate pace. The Producer Price Index jumped 1 percent last month, the Labor Department said, exceeding the 0.6 percent increase expected and above January's flat reading. It was the biggest jump in the main index since October 1990. The core rate, which excludes food and energy costs, rose 0.3 percent, in line with expectations of and reversing January's 0.2 percent drop. Bonds and S&P futures advanced after the report's release as investors concluded inflation at the core level remains subdued, at least for the time being. Tame costs on the production line typically mean stable consumer prices, since producers don't have rising expenses to pass on to buyers. "The core numbers in particular are encouraging but we're beginning to see some evidence of price pressures, particularly in oil," said Robert Brusca, chief economist with Ecobest Consulting. "The Federal Reserve still has its foot on brakes and will keep tapping them at regular intervals." Fed officials meet next Tuesday in Washington to discuss monetary policy and the direction of short-term lending rates. Most Wall Street analysts expect the Fed will wrench up its benchmark rate for overnight loans between banks by another quarter point. That would be the fifth quarter-point increase since June. The rate now stands at 5.75 percent. Oil drives PPI

Energy prices for producers jumped 5.2 percent in February, the biggest increase since October 1990, reflecting a whopping 30.6 percent surge in the cost of home heating oil and a 12.9 percent jump in prices at the pumps for gasoline. In January, producers' energy costs rose 0.7 percent. Those increases reflect the recent surge in oil prices. In the past 14 months, oil prices have tripled, rising above $34 a barrel, on concern that the Organization of Petroleum Exporting Countries won't boost its output next month to prevent global shortages. Tobacco prices, meanwhile, jumped 5.6 percent last month, more than reversing January's 4.2 percent drop. Cigarette prices rose 6.3 percent as manufacturers such as Philip Morris Cos. raised U.S. cigarette prices to distributors by 13 cents a pack, or about 7 percent. New York State also boosted taxes on cigarettes last month, raising the price on a single pack of 20 cigarettes to $4.50 from $4.00. In other categories, food prices increased 0.4 percent in February, after rising 0.1 percent in January. Prices for new computers fell 3.3 percent, auto prices fell 1.2 percent, and prescription drug prices declined 0.2 percent. Separately, the Commerce Department reported that housing starts rose 1.3 percent to a 1.78 million-unit rate in February, above economists' expectations of a 1.71 million rate. January's starts, however, were revised to show a 0.6 percent decline to a 1.76 million rate. The original data showed a 1.5 percent jump to a 1.78 million rate

http://cnnfn.com/2000/03/16/economy/economy/

-- Martin Thompson (mthom1927@aol.com), March 16, 2000