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US wholesale prices tame outside costlier gas

US wholesale prices tame outside costlier gas

March 15th, 2012 in News

WASHINGTON (AP) - Higher gas costs drove U.S. wholesale prices up last month. But excluding the big jump in gas, inflation was mostly tame.

The Labor Department said Thursday that the producer price index rose 0.4 percent in February. Food prices declined to offset some of the increase in energy costs.

The so-called "core" index, which excludes food and gas prices, increased 0.2 percent, the smallest gain in three months. An increase in pharmaceutical prices accounted for roughly one-third of the gain.

In the past twelve months, wholesale prices have increased 3.3 percent. That's the smallest year-over-year gain since August 2010.

The report "suggests that inflationary pressures are still contained," Paul Ashworth, an economist at Capital Economics, said in a note to clients. "More evidence that the U.S. economy could finally be on the right track."

Modest wholesale inflation reduces pressure on manufacturers and retailers to raise prices. That helps keep consumer prices stable. Low inflation also allows the Federal Reserve to keep short-term interest rates near zero.

Energy prices are a concern. They rose in February after falling in the two previous months. Wholesale gas costs jumped 4.3 percent, the biggest rise in five months.

Oil and gas prices have surged since the beginning of the year. The average retail price for a gallon of gas was $3.81 on Wednesday, according to AAA. That's 50 cents higher than a month ago.