Wholesale costs in the U.S. rose in November by the most in eight months, led by higher prices for gasoline, heating oil and fruit. The producer price index increased 0.8 percent from the prior month after a 0.4 percent rise, Labor Department figures showed today in Washington. Excluding more volatile food and energy costs, the so-called core measure posted the smallest year-over-year gain in five months. Limited demand, stemming in part from unemployment near a 26-year high, is making it difficult for companies to pass on higher raw materials costs. The wholesale data underscore last month’s decision by Federal Reserve policy makers, who are meeting today, to take more steps to bolster the economy and prevent deflation, or a prolonged period of price declines. “You have the commodity and energy price appreciation that has occurred over the last several months but at the core inflation is still very weak,” Russell Price, a senior economist at Ameriprise Financial Inc. in Detroit, said before the report. “It gives the Fed some level of comfort. So far the scenario has been supportive of their move.” Economists forecast producer prices would rise 0.6 percent, according to the median of 76 projections in a Bloomberg News survey. Estimates ranged from gains of 0.2 percent to 1.2 percent. Excluding food and fuel, prices were projected to increase 0.2 percent, according to the Bloomberg survey. Forecasts ranged from a decrease of 0.1 percent to a gain of 0.8 percent. Compared with a year earlier, companies paid 3.5 percent more for goods last month after a 4.3 percent gain in October. Excluding food and energy, wholesale prices rose 1.2 percent in the most recent 12 months, following a 1.5 percent increase. Core Inflation So-called core prices rose 0.3 percent in November from a month earlier, reflecting a rebound in passenger car costs and higher pharmaceutical preparations, after a 0.6 percent drop in October. New-car prices increased 1.7 percent, the most since 2006, after a 3 percent drop in October that was the biggest decline in more than four years. Prices of light trucks rose 0.3 percent, after a 4.3 percent decline that was the largest since October 2006. Last month’s report included the Labor Department’s valuation of quality changes for 2011 model vehicles. The decline in prices for October suggests new vehicles were outfitted with better equipment or more options, while manufacturers kept price adjustments to a minimum. Import Prices The PPI is one of three monthly inflation gauges reported by the Labor Department this month. Import prices rose 1.3 percent in November, the government’s figures showed on Dec. 10. The consumer price index is scheduled to be released tomorrow. The cost of food increased 1 percent, today’s report showed. Egg prices increased 23 percent, the most since April 2009, and fresh fruits and melons rose 14 percent, the biggest rise since December 2009. Energy prices rose 2.1 percent. Gasoline costs were up 4.7 percent and home heating oil prices increased 7 percent, the most since August. Expenses for intermediate goods rose 1.1 percent from the prior month and were up 6.3 percent from a year earlier. Prices of crude goods, or materials used at the earliest stage of the production process, increased 0.6 percent. Fed policy makers, meeting today for the last time this year, may indicate that while the economy showed signs of picking up at the end of the year, high unemployment and a risk of a prolonged drop in prices remain. The Fed is scheduled to release its policy statement around 2:15 p.m. in Washington. Fed’s Bernanke Without action by the U.S. central bank last month to purchase as much as $600 billion of Treasury securities, the economy might have tipped into a period of deflation, Chairman Ben S. Bernanke said in an interview on CBS Corp.’s “60 Minutes,” aired Dec. 5. He said fears of inflation are “overstated” and that keeping price pressures under control isn’t a diminished priority for the central bank. Companies, concerned about boosting sales, are absorbing higher costs rather than passing them on to consumers. The Fed’s preferred gauge for consumer prices, which excludes food and energy, rose 0.9 percent in October from a year earlier, the smallest gain on record, according to Commerce Department data. “They’d love to be able to pass on the prices but I don’t think they can, the level of competition is too great,” said Robert Stein, a senior economist at First Trust Portfolios in Wheaton, Illinois. “The producers are going to have to absorb at least some of the costs themselves.” Computer Prices Cheaper component prices for some companies are allowing for bigger corporate profits. Dell Inc., the third-largest supplier of personal computers, last month posted earnings that beat analysts’ forecasts, helped by cheaper parts and buoyant spending from companies that are updating aging personal computers and servers. Today’s Labor Department report showed computer prices in November were down 8.8 percent from the same month last year. Profit margins were helped by “pricing discipline” that kept Dell from cutting product prices too much, Chief Financial Officer Brian Gladden said in an interview after the results. The costs of computer memory and hard drives have declined, and that also shored up profitability, he said. Still, parts prices may “bottom out” this quarter and there will be a “more challenging competitive environment,” Gladden said on a conference call. To contact the reporter on this story: Courtney Schlisserman at cschlisserma@bloomberg.net To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net

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