In this Dec. 7, 2011 photo, Tina VanPelt and her son Soloman, 4, shop at a Costco store, in, Portland, Ore. Wholesale prices rose modestly last month as companies paid more for such items as food and pharmaceuticals. But energy prices barely rose, keeping inflation in check.(AP Photo/Rick Bowmer)
In this Dec. 7, 2011 photo, Tina VanPelt and her son Soloman, 4, shop at a Costco store, in, Portland, Ore. Wholesale prices rose modestly last month as companies paid more for such items as food and pharmaceuticals. But energy prices barely rose, keeping inflation in check.(AP Photo/Rick Bowmer)
WASHINGTON (AP) ? Wholesale prices rose a modest 0.3 percent last month as U.S. companies paid more for such items as food and pharmaceuticals. But energy prices barely rose, keeping inflation in check.
In the 12 months ending in November, wholesale prices have increased 5.7 percent, down from a 5.9 percent year-over-year pace in October, the Labor Department said Thursday. It's the smallest yearly increase since March. The department's producer price index measures price changes before they reach consumers.
Excluding the volatile food and energy categories, the so-called "core" index rose 0.1 percent, after a flat reading the previous month. In the 12 months ending in November, the core index rose 2.9 percent, up a yearly pace of 2.8 percent in October.
Most economists say they think inflation has peaked and will slowly decline next year. That's because prices for oil and many agricultural commodities have fallen from their highs this spring. Slower growth in China and a possible recession in Europe have reduced global demand for energy and other goods.
Producer price inflation "appears to have peaked and begun a slow retreat," Steven Wood, an economist at Insight Economics, said in a note to clients.
Lower price growth means consumers will have more buying power, potentially boosting consumer spending. The jump in gas and food prices earlier this year limited the ability of consumers to buy other goods, thereby slowing the economy.
Consumer spending rebounded in the July-September quarter as prices eased. The stronger spending helped increase growth to an annual rate of 2 percent from a slight 0.9 percent in the first half of the year. Economists expect consumer spending to rise again in the last three months of this year and think growth could top 3 percent.
Wholesale food prices rose 1 percent last month, driven higher by a sharp increase in the cost of vegetables. Prices for lettuce, broccoli and cauliflower jumped sharply.
Chicken and other meat prices also rose. But with the price of grains and other farm goods declining, food prices will likely follow suit, economists noted.
The cost of pharmaceuticals and autos increased, pushing up the core index. But prices for pickup trucks and industrial machinery declined.
Federal Reserve policymakers, like many private economists, predict inflation will fall next year. That would give the central bank more latitude to hold down interest rates and potentially take other steps to stimulate the economy.
The Fed declined to make any new moves at its latest meeting Tuesday. It reiterated its commitment to keep the benchmark short-term rate it controls at nearly zero through mid-2013. If there were signs that inflation was increasing to worrisome levels, the Fed would likely raise rates.
The central bank said last month that it expects consumer inflation to fall from about 2.8 percent this year to roughly 1.7 percent next year. That's in the Fed's preferred range of core inflation of about 1.7 percent to 2 percent. Economists at Wells Fargo expect it to drop to 1.8 percent by the end of next year.
A small amount of inflation can be good for the economy. It encourages businesses and consumers to spend and invest money sooner rather than later, before inflation erodes its value.
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