WASHINGTON, Oct 18: US wholesale prices surged 1.9 per cent in September as energy prices skyrocketed, the government said on Tuesday, in a report heightening fears about inflation in the overall economy.

But the “core” rate of the producer price index (PPI), excluding food and energy, increased a more modest 0.3 per cent, the Labour Department reported.

Both the headline and core rates were higher than expected on Wall Street — where analysts projected a rise of 1.2 per cent and 0.2 per cent, respectively — and highlighted concerns about increasing inflationary pressures.

The 1.9 per cent jump has not been exceeded since 1974 amid the Middle East oil embargo, analysts noted.

“Slowly, but inexorably, inflationary pressures are building across the economy,” said Joel Naroff of Naroff Economics.

“While I’ve said on many occasions that the pathway from wholesale to retail prices is hardly direct, the broad-based nature of the increases is worrisome.”

Price increases were led by a 7.1 per cent rise in wholesale energy costs, the biggest jump in 15 years. Food prices also soared, rising 1.4 per cent on a record 49 per cent increase in egg prices.

The PPI data come days after the Labour Department said consumer prices increased a hotter-than-expected 1.2 per cent in September on higher energy prices. Prices for crude oil and gasoline have since retreated, but natural gas prices have remained high.

The PPI and CPI data are likely to keep the Federal Reserve on track to raise short-term interest rates at the November 1 meeting and in December as well.

Fed officials have said they will have to raise rates to battle inflation, trusting that economic growth will reaccelerate next year.

“The increase in producer prices is not surprising given the huge increases in energy prices stemming from Hurricane Katrina during the month of September,” said RBC Financial economist Jack Homareau.

“While high energy prices have added upward pressure on inflation, so too have rising unit labour costs, slowing productivity and a huge injection of fiscal stimulus into the economy. All these factors combined suggest the Fed is not yet finished hiking interest rates,” Homareau added.

“Of course, what matters for the Fed is whether these input cost increases ultimately get passed through to the finished goods/consumer price level,” said Michelle Girard, an economist for RBS Greenwich Capital.

“The CPI reports of late suggest that firms have gained little pricing power in the wake of the storms.”—AFP