Oil hits US wholesale prices

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Thursday, 9 November, 2000, 14:20 GMT Oil hits US wholesale prices

The rate of factory-gate inflation in the United States has gone up - but the core rate is still moderate.

Wholesale prices are now rising at an annual rate of 3.6%, after increasing by 0.4% in October.

But that is largely due to a sharp increase in the cost of oil products. The so-called core rate of producer price inflation, excluding food and fuel, actually fell 0.1% in the month to an annual rate of 1.0%.

"The fact the core rate fell is going to be more impressive for the markets than the overall jump in producer prices. I think people realise the overall trend is pretty benign," said Kevin Logan of Dresdner Kleinwort Benson.

Interest rate fears

The US central bank, the Federal Reserve, has been closely watching the inflation rate for any signs of acceleration after eight years of steady economic growth.

It meets next week to decide on interest rates.

Most analysts are expecting the Fed to leave interest rates unchanged at 6.5%, as there are now signs that the US economy has begun to cool in the third quarter of the year.

Some economists believe that the high energy prices will impact on consumer prices and consumer spending this winter, helping to slow down the economy further.

"It is natural gas that we think will be a problem as consumers in most of the country heat with natural gas. They are going to have very high heating bills over the winter. That will have restraining impact on the economy," said Carol Stone of Nomura Securities.

Auto prices down

The moderation in the inflation rate was helped by cost cutting for some big ticket items.

Prices of automobiles showed the biggest drop since 1990, down 1.8%.

The drop more than reversed the gain of 1.4% recorded in September.

Wholesale computer prices, meanwhile, continued to fall in October, dropping 0.7% after a 0.3% decline in September.

Further up the production pipeline, inflationary pressures continued to weaken. Prices of intermediate goods rose 0.2% after a 0.7% increase in September.

Intermediate goods are goods like chemicals used by companies to make consumer goods.

http://news.bbc.co.uk/hi/english/business/newsid_1015000/1015285.stm

-- Martin Thompson (mthom1927@aol.com), November 09, 2000


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