WASHINGTON -- In an inflation report that startled analysts, prices received by American producers jumped 0.7 percent in October, the biggest increase in a year, government figures showed yesterday. But close examination found the report much less worrisome than it first appeared.
Given the weak economy -- and perhaps lulled by a string of favorable reports -- most specialists had expected little change in the Producer Price Index of finished goods, which measures inflation in the cost of goods just before they reach retail shelves and showrooms.
Analysts said that the report was likely to reduce the chances of a further easing of Federal Reserve monetary policy -- a prospect that was not considered highly likely anyway because the central bank moved last week to lower interest rates.
Most analysts, to one degree or another, regarded the October Producer Price Index as a fluke, the result of Labor Department difficulties in applying seasonal adjustment factors combined with various price increases that bunched up in one month, some of which seem unlikely to be sustained.
"I think it's an aberration," said Brian J. Fabbri, chief economist at Midland Montagu Economics. "We simply have not seen any sign of consumer or corporate demand for products" consistent with high inflation. "There's surplus labor, surplus capital all over," he said.
The price of new cars, for example, rose 0.5 percent last month and that of light trucks surged 1.2 percent, yesterday's report showed, but the figures are at odds with all the evidence about car sales. Indeed, automakers issued another grim report yesterday, saying sales were down 13.4 percent for the first 10 days of this month.
Analysts said that they were encouraged by the price report's finding that costs at the intermediate stage of production -- a sack of flour, say, as compared with a loaf of bread -- posted a decline of 0.1 percent, offsetting a September advance.
"The producer price increase appears to be an inflationary red herring in the road of a relatively non-inflationary, weak economy," said Ron Schreibman, vice president of the National Association of Wholesaler-Distributors, a trade association whose members pay the prices recorded by the finished-goods index.
"Producers increased prices on a broad range of goods in October," he said, "but whether these increases will stick, in the face of continued hesitancy to spend by consumers and businesses, remains to be seen."
There were some specialists, however, who found little to cheer in yesterday's report, which included a rise of 0.5 percent in the so-called core inflation rate, the biggest increase since January. The core rate, which omits the usually erratic food and energy components, was unchanged in September, and monthly increases from June to August averaged just 0.1 percent.
"A 0.5 percent core for finished goods is clearly a quantum difference from preceding months," said Joel Popkin, who runs a Washington consulting firm. He described inflation as "intractable" and, though not accelerating, "not getting any better."
The increase in finished-goods prices, to a level 22.3 percent higher than its 1982 base but unchanged from its October 1990 level, was heavily influenced by a 1.7 percent gain in energy prices, twice the September increase, and a rise in food prices of 0.4 percent, which followed a decline of 0.5 percent in September.
Electricity and gasoline rose sharply, and liquefied petroleum gas soared 17.1 percent. But the price of natural gas fell, and home heating oil rose much less than in the preceding months.