Energy Costs On The Rise

Prices charged by factories, farms, and other producers rose 0.2 percent in October, reflecting the first increase in energy prices in five months and rising costs for vegetables and eggs.

The seasonally adjusted increase in the Producer Price Index (PPI) for finished goods, reported Friday by the Labor Department, was slightly larger than expected. But it wasn't likely to rattle economists' belief that inflation is largely being kept in check by lack of demand resulting from a worldwide economic slump.

For the first 10 months of this year, producer prices declined at a 0.5 percent annual rate, compared with a drop of 1.2 percent for all of 1997.

Many analysts believe continued low inflation could give Federal Reserve officials confidence to cut interest rates again at their next meeting on Nov. 17, in order to further insulate U.S. businesses from global economic troubles.

In October, seasonally adjusted energy prices rose 1.2 percent, the first increase since May and the largest in nearly two years. Gasoline prices were up 5.7 percent, after steady declines that have brought them down more than 25 percent from a year ago. Residential gas and electricity prices also rose in October.

Falling energy prices have been one of the driving forces behind deflation; they are down 10.1 percent from a year ago. However, many analysts have been expecting them to bottom out.

Written by Alice Ann Love