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Wholesale prices tumble as energy costs plunge

WASHINGTON -- A huge drop in energy costs helped push prices at the wholesale level down last month by the largest amount in nearly three years. But with the cost of gasoline rising again, the reprieve could be short-lived.

The Labor Department reported yesterday that wholesale prices fell by 1.4 percent in February as food and energy both recorded big declines.

But analysts cautioned against reading too much into the February decrease, saying it was heavily influenced by a warm winter, which cut demand for home heating fuel and helped energy producers rebuild inventories depleted after last fall's hurricanes.

The government reported yesterday that the average retail price of gasoline soared by 13.8 cents last week to $2.50 per gallon for regular grade. Unleaded gasoline futures are up by 42 cents per gallon since mid-February.

The rise in futures contracts will soon pinch motorists at the pump, and what happens to crude oil prices remains the big wild card on what will happen with inflation this year. While crude oil prices have dipped below $60 per barrel this week, it is uncertain how long they will stay at that level.

The drop in the overall producer price index was much larger than economists had been expecting. It followed a report last week that the closely watched consumer price index edged up a tiny 0.1 percent in February following a 0.7 percent jump in January.

Outside of energy and food, core prices at the wholesale level rose by 0.3 percent last month, a bigger increase than the 0.1 percent economists had forecast.

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