US inflation reaches 3.2 percent - highest level in 34 years - due to oil prices

Photo: US inflation reaches 3.2 percent - highest level in 34 years - due to oil prices

The U.S. inflation reached 3.2 percent in November – the figures that are worse than economists were expecting. The wholesale prices were forecasted to go up by 1.5 percent, and core prices to increase 0.2 percent, according to the AP report.

The jump was the biggest in 34 years and was propelled by a record rise in gasoline prices.

The Labor Department reported Thursday that the big inflation pickup in the Producer Price Index, which measures the costs of goods before they reach stores shelves, came after wholesale prices inched up by just 0.1 percent in October.

As volatile energy and food prices were removed, all the other prices were up by 0.4 percent in November, after being flat a month ago. The pickup in "core" prices suggested inflation may be seeping into a wider range of goods. The only time a bigger increase was one year ago.

Soaring gasoline prices that leaped by a record 14.1 percent in November were the mostly blame.

Gasoline prices posted an all-time high increase of 34.8 percent last month. Diesel fuel prices jumped 35.8 percent and home heating oil soared 31.5 percent.

In another report, new applications filed last week for unemployment benefits dropped by 7,000 to 333,000, the lowest level since the middle of November. It was an encouraging sign that the employers aren't resorting to large-scale layoffs as they cope with an economy whose growth has been slowed by housing and credit troubles.

The figures were close to analysts' forecasts for claims to dip to 335,000.

The housing collapse and credit crunch led to slowdown of new-job creation - construction companies, factories, mortgage companies and others slash jobs.

Rising inflation could complicate the Federal Reserve's job of trying to keep the fragile economy expanding and inflation low.

The Fed on Tuesday sliced a key interest rate to 4.25 percent, the third reduction this year, in an effort to prevent the country from falling into a recession. Rate reductions are a bracing tonic for weak economic growth, while rate increases are used to combat inflation.

High energy prices could provoke spreading inflation and slow economic activity because the prices of lots of other goods would be also pushed. Oil prices are moderate but high - nearly $100 a barrel.

"Elevated energy and commodity prices, among other factors, may put upward pressure on inflation," the Fed warned on Tuesday. The Fed pledged to continue to "monitor inflation developments carefully."

Some bright spots in the inflation report: food costs were flat in November, after rising by a sharp 1 percent in October. And, costs for electronic computers dropped 2.4 percent.

But prices for many other goods moved higher. Light motor truck prices rose 2.3 percent, the most in one year. Passenger car prices went up 0.6 percent and platinum and gold jewelry rose 2 percent.