Oct. 18, 2005--Producer prices shot up last month by the sharpest increase in 15 years, as Hurricane Katrina and record-high energy costs boosted prices for raw materials, the Labor Department reported Tuesday.
Higher purchasing and equipment costs saw many small businesses raise prices in September, a sign they are passing heftier costs along to customers, a National Federation of Independent Business survey released last week showed. Overall, consumer price gains last month reached a 25-year high, the government reported Friday.
September's producer price index jumped 1.9% in September, up from a 0.6% increase the previous month, according to the Bureau of Labor Statistics. . For the 12 months ending in September, prices rose 6.9%, compared to just 5.1% for year-over-year gains in August.
The index is the first government report to gauge the impact on producers of high-energy costs caused by Katrina, which slammed in the Gulf Coast on Aug. 29, disabling offshore oil supplies. Within a day of the storm, crude oil prices hit a record-high $70 per barrel, leveling off at about $60 per barrel through September and into October.
The bulk of the gains reflected higher costs for oil, gas and other energy related materials. Excluding volatile oil and food prices, core producer prices, which were unchanged in August, rose just 0.3% last month, the agency reported. Year-over-year, core prices were up 2.6% in September, compared to 2.4% in August.
Prices for crude materials, such as scrap steel and timber, were up 10.2%, after gaining 2.3% in August. Also up were intermediate goods, by 2.5%, and finished goods, by 7.1%. Topping the list were rising prices for residential natural gas and home heating oil. By contrast, residential electrical power was unchanged in September, after rising 0.2% in August.
"The storms caused uncertainty about the near-term economy," said NFIB chief economist William Dunkelberg, "but the impact for the states escaping the storms will hit businesses and consumers when winter weather arrives and brings huge increases in energy bills."
Even so, higher producer prices were already reflected in the NFIB's monthly optimism index, which reported rising prices among small businesses and called the outlook for more energy-cost increases "not favorable."
Fewer small businesses surveyed last month felt it was a good time to expand their facilities. Further, more firms reported reducing inventories rather than increasing them, with more saying stocks were "too low" instead of "too high."