November 9, 2018 10:30 AM, EST

Wholesale Prices Jump 0.6%, Most in Six Years

movement of goodsMarcio Jose Sanchez/Associated Press

WASHINGTON — U.S. wholesale prices rose by the most in six years last month, led higher by more expensive gas, food and chemicals.

The Labor Department said Nov. 9 that the producer price index — which measures price increases before they reach the consumer — leapt 0.6% in October, after a smaller 0.2% rise in September. Producer prices increased 2.9% from a year earlier.

Excluding the volatile food and energy categories, core wholesale prices rose 0.5% in October and 2.6% from a year earlier.

Despite last month’s increase, the figures suggest inflation pressures are mostly in check. The year-over-year price increase is lower than it was in the summer, when it topped 3%. And oil prices declined in October, which will likely lower gas costs in the coming months.

Wholesale Graph

Bloomberg News

The Federal Reserve is keeping a close eye on price changes as it monitors the economy for signs of overheating. The unemployment rate is at a five-decade low of 3.7% and companies are raising wages and salaries to attract and keep workers. Average hourly pay rose in October from a year earlier at the fastest pace in nearly a decade.

Companies may have to raise prices to offset the costs of higher pay, which could spur higher inflation. But businesses could also invest in more machinery and software to make their employees more efficient, which would enable them to pay more without raising prices.

Fed policymakers finished a two-day meeting Nov. 8 without changing the short-term interest rate they control. But most economists expect the Fed will hike short-term rates for a fourth time this year when it meets next in December. The Fed has signaled it expects to raise rates three more times next year.

After its meeting Nov. 8, the Fed issued a statement that suggested it saw little sign that inflation would accelerate beyond its 2% target. Consumer prices rose 2.3% in September from a year earlier.

The Nov. 9 report showed that wholesale gas prices rose 7.6% in October and food costs increased 1%. The price of new cars fell 0.7%, as automakers introduced their new car models last month. Newer cars typically include additional features and the government reflects that by lowering its measure of auto prices.