WASHINGTON — U.S. wholesale prices rose moderately in October as food costs jumped by the largest amount in five months.
The Labor Department reported Friday that its producer price index, which measures inflation pressures before they reach the consumer, increased 0.3% last month, slightly lower than the 0.4% gain in September.
Food costs rose 2.4%, the biggest increase since a 5.6% surge in May that was tied to shortages caused by the pandemic. Energy costs rose 0.8%, the most in three months.
The uptick in wholesale prices comes in the same week that government data showed retail prices did not change in October, and consumer inflation has risen just 1.2% over the past 12 months. The figures suggest some producers are only somewhat successful in passing along higher raw materials costs to customers.
Wholesale prices are up 0.5% over last year. Core inflation at the wholesale level, which excludes volatile energy and food, rose 0.1% for the month — the smallest gain since June — and is up 1.1% over last year. The Federal Reserve’s target inflation rate is 2%.
The index for final demand services increased 0.2%, the smallest advance in three months, after a 0.4% gain. Over a quarter of the monthly gain was traced to higher costs for long-distance trucking, which increased 1.9%.
The benign readings on inflation are a welcome sign at the Fed, which will feel comfortable staying put with ultra-low interest rates for a some time. Some economists believe it won’t begin raising rates until 2024.
Rather than worrying about inflation, economists say deflation could become the bigger concern as coronavirus infections surge across the United States. There have been more than 100,000 new confirmed U.S. cases reported daily for more than a week. Both California and Texas reached the grim milestone this week of a million cases of covid-19.
Consumers have a tendency to hold off on big purchases if they see prices falling, and that can turn into a deflationary cycle.
“The risk to inflation going forward is from another round of virus outbreaks that will suppress demand,” Rubeela Farooqi, chief U.S. economist at High Frequency Economics, said in a research note.
In a separate report, U.S. consumer sentiment unexpectedly declined in early November as an increase in covid-19 infections and the election prompted Americans to reassess their outlooks for the economy and finances.
The University of Michigan’s preliminary sentiment index for November decreased to a three-month low of 77 from a final October reading of 81.8, data released Friday showed. The median estimate in Bloomberg’s survey of economists called for a reading of 82.
The measure of expectations dropped by nearly 8 points to 71.3, while a gauge of current conditions was little changed at 85.8. Interviews conducted after the election recorded a substantial negative shift in Republicans’ expectations and no gain among Democrats. The survey began Oct. 28 and concluded late on Tuesday.
“Republicans now voice the least favorable economic expectations since Trump took office, and Democrats have voiced more positive expectations,” Richard Curtin, director of the survey, said in the report. “In the months ahead, the partisan gap is likely to enlarge, although the gains will be limited until a potential vaccine is approved and widely distributed.”
Consumers’ views about their current financial situations deteriorated to well below the pre-pandemic peaks, the report showed. Net declines in household incomes were reported in early November for the first time since March 2014, with the largest decrease among lower income households and older Americans.
Information for this article was contributed by Martin Crutsinger of The Associated Press and by Reade Pickert and Jarrell Dillard of Bloomberg News.