The price of energy rose by 4.4% in the month, with gasoline costs up by 10.4%. Analysts are warning consumers could face even higher prices at the pumps.
BBC NEWS: 2005/08/17 US producer prices rising sharply US wholesale prices are rising at the fastest rate in nine months, fuelling concerns that inflation is returning. http://newsvote.bbc.co.uk/mpapps/pagetools/print/news.bbc.co.uk/2/hi/business/4159978.stm The cause is rapidly increasing energy prices, with the price of gasoline at the pump now averaging $2.55 a gallon. Prices paid by wholesalers gained 1% in July, and are now at an annual rate of 4.8%, the Labor Department said. The price of energy rose by 4.4% in the month, with gasoline costs up by 10.4%. Analysts are warning consumers could face even higher prices at the pumps. The news comes a day after consumer prices jumped sharply. 'Could worry' Despite rising inflation, most analysts expect the US central bank to continue its measured increase in interest rates, and doubt that oil will have the same effect on the economy it did in the 1970s and 1980s. However, economists said that the Fed would be watching the headline rate of inflation closely for its effect on consumer confidence. "A big increase in gas prices could worry them about a slowing in the economy later," said Elizabeth Denison of Dresdner Kleinwort Wasserstein. The Fed has raised interest rates ten times by a quarter percentage point to 3.5%, and markets expect rates to reach 4% by the end of the year. However, if the oil price stays above $60 a barrel until the end of the year, it may begin to impact more severely on the consumer economy. On Tuesday, the US's largest retailer, Wal-Mart, warned that its profits would be hit by consumers spending less because of high gasoline prices. Cost pressure Reports on prices have shown different rates of growth, however. The US consumer price index rose by 0.5% in July, and the year-on-year inflation rate was 3.5%, less than the increase in wholesale prices. One of the main reasons for the higher rate of growth in wholesale prices was the timing of discounts in the auto industry. Big summer discounts were factored into the June wholesale price index, while the consumer price index counted the price cuts in July. Unlike cars, the cost of computers continued to fall, sliding by 2.1% in July, the Labor Department. However, so-called core inflation, which excludes food and energy, rose more slowly in both the wholesale and consumer price indexes. Story from http://news.bbc.co.uk/go/pr/fr/-/2/hi/business/4159978.stm ...
