WASHINGTON (AP) -- Wholesale prices in December posted their biggest increase in nearly a year, lifted by more expensive energy and food costs. But most other prices were largely well behaved, suggesting inflation isn't spreading through the economy.
The Producer Price Index, which measures price changes before they reach consumers, rose 1.1 percent in December, the Labor Department reported Thursday. That was up from a 0.8 percent rise in November and was the largest increase since January 2010.
But outside the volatile energy and food categories, all other prices rose just 0.2 percent, down from a 0.3 percent rise in November. That lower reading on "core" prices indicates that inflation isn't breaking out. In fact, most of the increase in core prices last month was due to a 2.9 percent increase in cigarette prices.
Federal Reserve Chairman Ben Bernanke predicts inflation won't be a problem for the economy this year.
Companies are still operating below full capacity and are under competitive pressure to keep a check on prices. Hiring is improving only gradually, meaning workers have little leverage to demand big pay raises.
In fact, Bernanke and other Fed officials for most of last year were worried that the weak economy could push the country into a period of deflation. That's a prolonged drop in prices, wages and values of homes and stocks. It's damaging to the economy and to the financial well-being of individuals and businesses.
Published: Fri, Jan 14, 2011
