Wholesale inflation jumps, core prices tame

Overall Producer Price Index up 1.1%, topping forecasts, but increase excluding food and energy is less than expected.

NEW YORK (CNNMoney.com) -- Prices paid by businesses at the wholesale level jumped more than expected in September on higher food and energy prices, although price pressures for other items stayed in check, according to a government report released Friday.
The Producer Price Index showed a 1.1 percent increase in the month, following a 1.4 percent drop in those prices in August. Economists surveyed by Briefing.com had forecast only a 0.5 percent in the PPI.
Energy prices rose 4.1 percent, while food prices jumped 1.5 percent in September.
But the more closely watched core PPI reading, which strips out volatile food and energy prices, rose only 0.1 percent, less than the 0.2 percent rise in August. Economists had forecast another 0.2 percent rise.
The rise left core PPI up 2.0 percent over the last 12 months, down from a 2.2 percent rise on that basis a month earlier. The Federal Reserve is generally seen as having a comfort zone for core measures of inflation as being up between 1 to 2 percent over a 12-month period. With the market closely focused on whether the central bank will again cut interest rates at its Oct. 31 meeting, the core PPI reading is seen as another green light for such a cut.
The PPI is one of the more volatile inflation readings, as the previous month's reading is not revised using more complete measures of prices. It also is a report of limited breadth, measuring only the price of goods, not services. But in the months when it is released ahead of the more closely followed Consumer Price Index, the government's key inflation reading of inflation at the retail level, the PPI gets a fair amount of attention from investors and economists.
Stock futures, which had been lower Friday, turned higher on the PPI report, as well as a stronger than forecast retail sales report.
The CPI report is set to be released Wednesday, with the overall CPI forecast to be up 0.2 percent after a 0.1 percent decline in August. The core CPI is forecast to be up 0.2 percent, the same gain seen in the August reading.
credited by: cnnmoney.com