Washington, DC, Nov. 14--Wholesale prices grew at the fastest pace in seven months in October amid a surge in prices of food and capital equipment, suggesting the risk of deflation is fading as the economic recovery gains steam.
The producer price index for finished goods rose 0.8% in October, accelerating from a 0.3% rate in September, the Labor Department said Friday. The closely watched "core" index, which excludes food and energy items, rose 0.5%. That, too, marked the fastest rate in seven months.
The report surprised Wall Street. A consensus forecast of economists surveyed by Dow Jones Newswires and CNBC had called for a 0.1% increase in both the overall and core indexes. It shed light on why Federal Reserve policymakers, having spent the last year fretting about deflation, have again begun to strike cautionary notes about the risk of inflation.
The Labor Department said the acceleration in producer prices in October reflected price surges in most product categories. Prices of capital equipment rose 0.6%, the biggest increase since March. Prices of passenger cars rose 1.6%, also the biggest gain since March. Prices of telecommunications equipment rose 0.8%, the fastest rate in three months.
Food prices grew 2.2%, the fastest pace in nearly 20 years. Cigarette prices rose 0.6%, marking the biggest increase in 18 months.
Energy prices, however, declined for the first time in five months, falling 0.1%. Gasoline prices fell 3%, marking the biggest drop in five months. But prices of home heating oil surged 9.6%, the biggest increase since March.
