Wholesale Prices Up

Higher food prices pushed prices at the wholesale level up 0.3 percent in September, the Labor Department said Friday.

Excluding often-volatile food and energy prices, however, the core rate of inflation was flat for finished goods ready for sale at retail.

Economists had expected 0.1 percent gains in both the producer price index and in the PPI core rate, according to a survey conducted by CBS MarketWatch.

In a separate report, the Commerce Department said the U.S. trade deficit narrowed to $39.2 billion in August, as both exports and imports declined.

However, America's trade deficit with China surged to an all-time high, a development certain to add to the pressure in Congress to punish China for what critics contend are the country's unfair trade practices.

The Commerce Department said the August deficit was 2.1 percent lower than a revised July imbalance of $40.03 billion. That caught analysts by surprise because they had been forecasting the deficit would widen in August.

The improvement reflected big declines in imports of cars, auto parts and oil which helped to offset a smaller drop in U.S. exports. That was the result of a big plunge in shipments of civilian aircraft.

The report on wholesale prices shows no general trend toward accelerating inflation. Higher demand and scattered shortages are restoring pricing power for many producers of foodstuffs and industrial materials. September saw double-digits gains in prices for lumber, corn and cattle.

Food was the big story in September.

In September, finished food prices rose 1.2 percent, the largest gain since January. Prices for foodstuffs in the intermediate stage of processing rose 2.3 percent, the biggest increase in seven years. Crude foodstuff prices jumped 7 percent, the largest gain in 23 years.

At the wholesale level, vegetable prices rose 20.7 percent. At the crude level, slaughter cattle prices increased 11 percent, the most in 18 years.

Energy prices moderated. At the finished level, prices were up 0.1 percent, including a 2.2 percent rise in gasoline and 1.6 percent increase for residential natural gas. Home heating oil prices plunged 14.3 percent.