Wholesale prices shot up 0.4 percent in May, the biggest advance in 19 months, as escalating energy costs overwhelmed declines in food prices, the government said Thursday.
In other disappointing news, the government said that retail sales rose a bare 0.2 percent in May, far below expectations, while the number of Americans filing unemployment claims failed to show any improvement despite a holiday-shortened filing week.Analysts insisted that the spurt in inflation should be temporary given the pervasive weakness in the economy.
But they said it was worrisome enough to probably keep the Federal Reserve from any immediate further reduction in interest rates even though the retail sales figure showed the economy was clearly in need of further stimulus.
David Wyss, an economist at DRI-McGraw Hill, called the increase in wholesale prices disturbing, although he said it appeared to be concentrated in just a few areas.
"It brings into question whether the Fed should be fighting inflation or the recession, and the net result is that they probably won't do anything," Wyss said.
The Labor Department blamed the jump in its Producer Price Index, which measures inflationary pressures before they reach the consumer, on sharply higher costs for gasoline.
The tiny 0.2 percent rise in May retail sales was far below expectations for a 0.6 percent advance. Economists said it raised the question of whether this year's recovery is in danger of faltering just as a similar rebound did in 1991.