Prices paid to U.S. factories rose unexpectedly in September, the government said Thursday in a report analysts said reflects seasonal quirks rather than a dangerous uptick in inflationary pressures.
The Labor Department said its producer price index rose 0.3% after declining 0.4% in August. Most of the gain was attributed to an abnormal spike in passenger car and light-truck prices caused by seasonal distortions and recovering prices after the summer strike at General Motors Corp. Vehicle prices jumped 2.2%, their biggest gain since a 3% rise eight years ago.
The closely watched "core" producer price index, which strips out volatile food and energy costs, rose 0.4% after a 0.1% drop in August.
"It's a surprise report, but there's no change on the inflation outlook. It's not really signaling any significant price pressures," said Steven Gallagher, an economist at Societe Generale Securities Corp.
The jump in September came after eight declines over 10 months, but it did not prevent the inflation-wary Federal Reserve Board from cutting interest rates for a second time in less than three weeks to encourage businesses and consumers to keep borrowing and spending.
Oscar Gonzalez, an economist with John Hancock in Boston, called the gain in the index "an anomaly." Even with it, producer prices fell at an 0.8% annual rate for the first nine months of the year, compared with a 1.2% decrease for all of 1997.
"With more than half the world's economies in the tank, inflation at the producer price level has all but vanished," Gonzalez said. "Economic weakness is so pervasive globally that the market would be stunned if inflation became a major concern any time soon."
Energy costs inched down 0.1% as gasoline prices dropped 2%, but heating oil prices rose 6.6%--their biggest gain in almost a year.
Food prices gained 0.4%, propelled by a 12.4% increase in prices for fresh and dry vegetables.
A report released by the Federal Reserve Bank of Philadelphia later Thursday showed prices paid by companies in the mid-Atlantic region were at their lowest level in three decades, reinforcing analysts' belief that the threat of higher inflation was all but absent in the U.S. economy.
Other reports underscored the tone of weakness in the U.S. economy. The number of Americans filing first-time claims for unemployment benefits rose by 2,000 to 303,000 last week, still a low level. But continuing unemployment beneficiaries rose 22,000 to 2.2 million, suggesting more jobless people are having a harder time finding work.
Also, the Commerce Department said inventories of unsold goods at U.S. businesses rose in August by 0.3% and sales fell 0.2%. That was the second monthly sales decline and marked the first back-to-back drop since October and November of last year.