Food and fuel push up wholesale prices

WASHINGTON - Wholesale prices in December posted their biggest increase in nearly a year, lifted by more expensive energy and food costs. But most other prices were largely well behaved, suggesting inflation isn't spreading through the economy.

The Producer Price Index, which measures price changes before they reach consumers, rose 1.1 percent in December, the Labor Department reported Thursday. That was up from a 0.8 percent rise in November and was the largest increase since January 2010.

But outside the volatile energy and food categories, all other prices rose just 0.2 percent, down from a 0.3 percent rise in November. That lower reading on "core" prices indicates that inflation isn't breaking out.

Most of the increase in core prices last month was due to a 2.9 percent increase in cigarette prices.

Federal Reserve chairman Ben Bernanke predicts inflation won't be a problem for the economy this year.

About three-fourths of the increase in wholesale prices last month was due to higher energy costs. Energy prices rose 3.7 percent. Home heating oil prices jumped 12.3 percent and gasoline prices rose 6.4 percent.

A sharp rise in gasoline prices, which now top $3 a gallon, could cause people to cut spending on other things, slowing the economy.

Food prices rose sharply, too. They increased 0.8 percent in December, following a 1 percent rise in November. The increase reflected higher prices for vegetables and fruits.

The U.S. Agriculture Department reported Wednesday that grain prices surged to their highest level in 21/2 years.