US wholesale prices pushed up by higher energy costs

Factories are having to cope with higher energy bills. US wholesale prices saw their biggest increase in 11 months in December, led by higher energy and food costs, official figures have shown.The Producer Price Index rose 1.1% in December, compared with November's 0.8% gain. It was the largest increase since January of last year.

Heating oil saw the biggest price rise, up 12.3%, while the cost of petrol gained 6.4%. Food prices rose 0.8%.Excluding energy and food costs, prices rose just 0.2% last month.This was a slowdown on the 0.3% increase in November, said the Labor Department.

The figures come a day after the Federal Reserve said the US economy was continuing to grow moderately, but suffering from high unemployment.

Vegetable price rises

The big rise in US energy and food costs is being replicated around the world, as oil prices have increased following growing demand, and the cost of food has risen as bad weather has hit certain crops. "The danger is that falling prices can encourage consumers to delay purchases and can also aggravate debt problems”

Andrew Walker Economics correspondent, BBC World Service

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Among food products in the US, vegetables posted the biggest increase in wholesale prices in December, jumping 22.8%. They were followed by fresh fruits, which added 15%.Also on Wednesday, the US Agriculture Department warned that US grain prices had risen to their highest level in two and a half years. These price rises came as a result of a drop in corn and soya bean production.

Despite the big rise in US wholesale prices, it has yet to spread across to consumer inflation. Analysts say this is because companies are still operating below full capacity, and competitive pressures were meaning they are so far absorbing their own price rises.The most recent data for US consumer inflation showed that the Consumer Price Index measure rose just 0.1% in November, down from 0.2% in December.

The Federal Reserve, the US central bank, has also warned that deflation - falling prices - is a concern, as it encourages consumers to put off purchases in the hope that the cost will fall in the future.