With car prices rising and gas pump prices soaring in October, wholesale prices rose much more than expected.
The producer price index jumped 1.1 percent, the Labor Department reported Friday. Economists looked for a 0.2 percent gain, betting that the tame inflation that has allowed the Federal Reserve to leave interest rates at historic lows would continue.
The core rate of inflation, which excludes the volatile food and energy components, rose 0.5 percent compared to the flat reading expected from Wall Street.
Earlier in the production pipeline, core inflation still looks to be contained. Prices on goods in the intermediate stages of production outside of food and energy were up just 0.1 percent.
The headline increase was the largest since a matching gain in January 2001. The one-month gain in the core PPI was the most in more than three years.
Finished energy goods prices rose 4.2 percent, led by a 17.9 percent jump in pump prices as fears of a war with Iraq impacted energy markets.
Food costs were up 0.7 percent in October, led by an 11.5 percent gain that month.
But price gains stretched outside these volatile areas. Car prices were up 2.2 percent, the most for one month in more than a decade. But the change is likely based on seasonal factors. The increase follows discounting in September to make way for the new models. Light truck prices were up 1.9 percent.
Some pharmaceuticals saw over 1 percent gains as did alcoholic beverages. Civilian aircraft prices rose 0.5 percent.