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.
Meanwhile, oil prices fell nearly 5 percent yesterday as traders sold off contracts on rumors that Iraqi President Saddam Hussein had been overthrown, even though the State Department said it had received no such reports.
Crude oil for December delivery closed at $33.89 a barrel on the New York Mercantile Exchange -- down $1.64, or 4.6 percent, from Thursday's levels. Over the week as a whole, crude oil lost 11 cents a barrel.
Crude energy prices rose 18.9 percent in October, spurred by a huge 29.5 percent increase in crude petroleum, reflecting the temporary surge in oil prices above $40 a barrel several days last month. Oil prices have surged sharply since Iraq invaded Kuwait Aug. 2.
But analysts noted that even with the October jump in energy prices that the department reported yesterday, the overall oil-price surge appears to be abating. Energy prices rose 13.5 percent in September and 9.5 percent in August.
Wholesale food prices rose 0.9 percent in October, offsetting a similar decline the previous month. Analysts said that the volatility reflected adjustments in herds by beef and pork producers in anticipation of higher consumption.
Ronald Schreibman, vice president of the National Association of Wholesaler-Distributors, noted that with energy prices excluded, inflation at the wholesale level this year has been held to an annual rate of 3.2 percent, compared with a 4.9 percent gain in 1989.
One factor in holding prices down in October was that prices of new-model cars were lower than had been anticipated, probably reflecting a continued slump in sales of new cars.
But the price of crude goods other than foods and energy fell 1.7 percent, led by such items as scrap iron and steel, down 4.2 percent; scrap copper, down 4.4 percent; and non-ferrous metal ore, down 3.7 percent.