Meridian Star

Features

January 20, 2010

(10:16 a.m.) Economy

MARTIN CRUTSINGER,AP Economics Writer

WASHINGTON (AP) — Inflation pressures at the wholesale level eased in December as a drop in energy prices offset a big jump in food costs.

The Labor Department said Wednesday that wholesale prices edged up 0.2 percent last month, much slower than the 1.8 percent surge in November. Energy prices, which had been up for two months, fell in December.

The price performance at the wholesale level combined with last week's benign reading on consumer prices supported the view that inflation is not a problem.

That gives the Federal Reserve room to keep interest rates low to boost the country out of a deep recession.

Meanwhile, the Commerce Department reported that construction of new homes and apartments fell 4 percent in December to a seasonally adjusted annual rate of 557,000 units as bad weather hit much of the country.

But applications for new housing projects shot up 11 percent to an annual rate of 653,000, a better-than-expected performance indicating that builders are ready to ramp up production in 2010.

The 0.2 percent overall increase in wholesale prices was slightly higher than the flat reading economists had expected while the unchanged reading on core prices was lower than the 0.1 percent advance analysts had forecast.

Energy costs fell by 0.4 percent in December as the price of gasoline dropped by 3.2 percent, the biggest one-month decline since September. Natural gas prices fell by 1.9 percent, the biggest decline since last May.

Food costs rose by 1.4 percent, the third straight month of higher food costs. The December jump was led by a 9.4 percent rise in pork prices, the biggest increase in a decade, and a 3.7 percent increase in the cost of dairy products, the largest advance in more than two years.

The rise in food costs accounted for one-fifth of December's overall 0.2 percent rise in wholesale inflation.

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