WASHINGTON -- Pushed by another big jump in oil prices, wholesale prices surged a surprising 1.1 percent in October, intensifying concern about the impact of inflation on the fast-weakening economy, the U.S. government reported yesterday.
The October increase, which marked the third month in a row the key inflation index has surged by 1 percent or more, brought the rise in the overall Producer Price Index this year to an annual rate of 7 percent, the steepest since 1981.
At the same time, however, analysts said the increases appeared to be confined almost entirely to the energy sector and have not yet begun to "ripple" to prices of other goods or to wages. If that happens, it could set off a wage-price spiral similar to the one in the 1970s.
With the rise in energy prices excluded, the closely watched "core" rate of inflation -- which some analysts consider a more accurate measure of what lies ahead -- was unchanged from September's levels.
"It's definitely not a replay of the '70s," said Donald Ratajczak of Georgia State University in Atlanta, a specialist in price movements. "Then, if the price of oil kicked up, you also kicked up wages and spending programs."
Analysts said the stability of the underlying inflation rate -- combined with the threat to economic growth in the continuing rise in energy prices -- was likely to intensify pressure on the Federal Reserve Board to ease interest rates soon.
Donald Straszheim, chief economist at Merrill Lynch Capital Markets in New York, said the central bank could ease credit as early as Tuesday, when its policy-setting Federal Open Market Committee meets to review overall money and credit policies.
"To me, the time for Fed ambiguity on easing is past, because there is no danger of inflation, and the economy is unambiguously falling -- atthis point sharply," Mr. Straszheim said.
Irwin L. Kellner, economist at Manufacturers Hanover Trust Co. in New York, agreed. "The problem is not inflation, but deflation," he said. Commodities are down. Gold is down. Real estate is down. Many more things are falling in price than rising."
That view apparently was shared in the financial markets, where stock prices rose sharply yesterday as investor expectations that the Fed might reduce interest rates sparked a rally in the stock market. The Dow Jones industrial average rose 44.80 points toclose at 2,488.61.
