Washington, DC, Jan. 14--Wholesale prices were flat in December as falling prices for cars, computers and telephone equipment offset higher prices for gasoline and other energy products.
The flat reading in the Producer Price Index, which measures prices paid to factories, farmers and other producers, came after wholesale prices fell by 0.4% in November, according to the Labor Department.
The department's latest report on wholesale prices continued to show that inflation is not a danger to the nation's economy, which is struggling to get back to full health after being knocked out by the 2001 recession.
Wednesday's PPI figures surprised economists. Many were forecasting wholesale prices to go up by 0.3% in December from the previous month.
Excluding energy and food prices, which can swing widely from month to month, core wholesale prices dipped by 0.3% in December for the second straight month. That reading also was better than the small 0.1% rise that analysts had predicted.
Falling prices, if passed on to shoppers at the retail level, are a benefit for consumers, but a profit squeeze on some companies.
Businesses whose product prices are going down may feel even more pressure on already strained profit margins. But companies that buy those lower-price goods might get a break through lower costs of doing business.
In the PPI report, energy prices rose 0.9% in December, a turnaround from a 1.8% drop in November. Crude oil prices have been impacted by supply disruptions due to a strike in Venezuela, a major oil exporter to the U.S., and fears that a possible war with Iraq could impede the flow of oil.
The Organization of Petroleum Exporting Countries agreed to boost production but that may not alleviate tight supplies, some economists say.
Gasoline prices in December went up 1.6% from the previous month.
Venezuela's strike has contributed to an increase in prices at the pump in the past three weeks to an average $1.50 a gallon, according to the Lundberg Survey of 8,000 U.S. service stations. The Energy Department says American motorists could pay up to $1.54 per gallon of gasoline this spring even if war is averted in Iraq.
Home heating oil prices rose 4.7% in December and liquefied petroleum gas, such as propane, rose 7%, the biggest increase since September. Residential electric power increased 0.6%.
Food prices went up 0.4% in December, following a 0.3% increase.
Those price increases were offset by lower prices elsewhere.
Car prices last month dropped 2% and truck prices fell 1.6%, the biggest decline since July. Computers prices fell 2% and telephone equipment prices went down by 1.3%.
For all of 2002, wholesale prices rose 1.2%, compared with a 1.6% drop in 2001.
The increase largely reflected rising energy costs. Energy prices rose 11.9%, a turnaround from a 17.1% decline the year before.
