http://www.nytimes.com/aponline/us/AP-Economy.html?hp

Producer Prices Soar in January

By THE ASSOCIATED PRESS
Published: February 26, 2008

Filed at 8:45 a.m. ET

WASHINGTON (AP) -- Inflation at the wholesale level soared in January
by the fastest pace in 16 years, pushed higher by rising costs for
food, energy and medicine.

The Labor Department said Tuesday that wholesale prices rose 1 percent
last month, more than double the 0.4 percent increase that economists
had been expecting.

The worse-than-expected performance was certain to capture attention
at the Federal Reserve, which has chosen to combat a threatened
recession by aggressively cutting interest rates in the belief that
weaker economic growth will keep a lid on prices.

But the combination of rising inflation and weaker growth raises the
threat of ''stagflation,'' the economic malady that plagued the
country through the 1970s, when a series of oil shocks left households
battered by the twin problems of stagnant growth and rising prices.

The 1 percent jump in wholesale prices followed a 0.3 percent decline
in December and was the biggest one-month increase since a 2.6 percent
increase in November. That gain had been driven by sharply higher
energy costs.

With the January jump, wholesale prices have risen over the past 12
months by 7.5 percent, the fastest increase since the fall of 1981,
when the country was in a deep recession.

The big jump in wholesale prices followed a worse-than-expected
increase in consumer prices, which rose by 0.4 percent last month as
consumers got hit by higher costs in the same areas of food, energy
and health care.

The wholesale report said that energy prices jumped 1.5 percent,
reflecting a 2.9 percent rise in gasoline and an even bigger 8.5
percent jump in the cost of home heating oil.

Food prices, which have been surging because of increased demand
stemming from ethanol production, rose by 1.7 percent last month, the
biggest monthly increase in three years. Prices for beef, bakery
products and eggs were all up sharply.

Core wholesale inflation, which excludes food and energy, posted a 0.4
percent increase, the biggest increase in 11 months. This gain was led
by a 1.5 percent spike in the cost of prescription and
non-prescription drugs.

--
"Now, by the way, any time you hear the United States government
talking
about wiretap, it requires -- a wiretap requires a court order.
Nothing has
changed, by the way. When we're talking about chasing down terrorists,
we're
talking about getting a court order before we do so"
-George W. Bush, April 20, 2004

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