Wholesale-Price Report Is Played Down --- One-Time Items Are Cited By Economists, Who See Few Signs of Retail Rise
WASHINGTON -- Though a sharp jump in wholesale prices in September set off fears on Wall Street that long-dormant inflation has awakened, economists said the numbers were artificially boosted by a number of one-time factors, and that widespread evidence of rising prices was still slight.</br></br>Indeed, the report seems unlikely to spark much panic in one place it matters most, the Federal Reserve, which is charged with keeping inflation in check. In comments over the past few weeks, top officials have been more likely to marvel about the tameness of prices than to express concern about nascent inflation.</br></br>"The sticker shock . . . exaggerates the inflation numbers," economists at Warburg Dillon Reed LLC wrote Friday in a report to clients, adding that the price rises "do not represent a significant change in the underlying trend of inflation." The Fed, too, "will be able to look past these developments," the Warburg analysts concluded. While the odds of a central-bank interest-rate increase next month may be rising, they said, "they are not yet above 50% in our opinion."</br></br>The numbers in the Labor Department's producer-price report for September were, indeed, stunning. The index for finished goods soared by 1.1%, seasonally adjusted, the biggest monthly increase in nine years. That followed a large 0.5% jump in August, an especially terrible back-to-back performance for a price gauge that has been flat or negative for much of the past two years. Even stripping out the volatile food and energy sectors, the so-called core index jumped by a hefty 0.8%.</br></br>The stock-market reaction was equally dramatic. The Dow Jones Industrial Average fell 266.90, or 2.6%, to 10019.71, and briefly dipped below 10000 for the first time since April. Investor inflation jitters were aggravated by comments made by Fed Chairman Alan Greenspan the night before warning investors and lenders against excessive confidence in the market's lofty levels.