U.S. wholesale prices rose by the most in three years in August as the cost of energy soared, but underlying inflationary pressures were contained, the government reported Thursday. The Labor Department said its producer price index (PPI), which measures costs before they reach consumers, increased 1.7 percent last month, the biggest gain since June 2009 and accelerating from July's 0.3 percent rise. Economists had expected prices at farms, factories, and refineries to rise 1.1 percent last month. The PPI increase was driven by a 6.4 percent gain in energy prices, the biggest monthly rise in three years. Energy prices, which were pushed higher by a jump in gasoline costs, accounted for more than 80 percent of the rise in wholesale prices last month. Energy prices had fallen 0.4 percent in July. Food prices rose 0.9 percent, the biggest gain since November. Food prices had increased 0.5 percent in July and could remain elevated as a severe drought pushes up the cost of grain, corn, and soybeans. Wholesale prices excluding volatile energy and food costs rose only 0.2 percent, slowing from a 0.4 percent increase in July. In the 12 months ending in August, PPI increased 2.0 percent, the largest gain since March, after advancing 0.5 percent in the 12 months ending in July. Despite the rise in overall wholesale inflation last month, there is likely to be little effect on consumer prices due to weak job growth and sluggish domestic demand. Consumer inflation currently is below the Federal Reserve's (Fed's) 2 percent target. Officials from the U.S. central bank were meeting for a second day on Thursday to deliberate on monetary policy. The Fed is expected to announce the launch of a third round of bond purchases to spark the economy.
