Producer-Price Report Is Inconclusive --- Index Rises 1% for Month; Excluding Food, Energy, Prices Increased 0.3%
WASHINGTON -- For months, market-watchers and analysts have been on the lookout for any sign that inflation -- largely dormant for years -- may be stirring.</br></br>But the latest gauge, the Labor Department's February producer-price index, which measures prices paid to the nation's farms, factories and refineries, proved inconclusive.</br></br>Inflation hawks could cite the index's larger-than-expected 1% increase, the largest monthly advance since October 1990, as evidence that a broader resurgence may be on the horizon. As in previous months, much of that increase stems from a sharp run-up in the cost of energy goods, which soared 7.5%, the biggest gain in almost a decade. Wholesale prices overall were 4% higher than they were in February 1999, the largest year-over-year change in more than 13 months.</br></br>On the other hand, the report offers some reason for optimism. Excluding food and energy, prices rose 0.3% for the month, with a 6.3% surge in cigarette prices accounting for all of that increase. For the past 12 months, prices for core finished goods climbed just 1%, the lowest year-over-year change since last November.</br></br>Investors seemed undisturbed by yesterday's inflation report. The Dow Jones Industrial Average rose 499.19 points -- a record rise when measured by points gained -- to close at 10630.60 as investors poured cash into blue-chip stocks. Bonds, which tend to fall in price on any sign of inflation, actually rose yesterday. The 10-year Treasury bond rose 10/32 point, about $3.125 for a bond with a $1,000 face amount. The issue's yield eased to 6.238%.