(Agencies)
Updated: 2008-03-18 23:04

WASHINGTON -- Wholesale prices rose again in February as another hefty increase in energy costs offset falling food prices. Outside of food and energy, prices shot up at the fastest pace in 15 months.

A grain transport truck is loaded up with corn, harvested in the fall of 2007, in Curran, Ill., Friday, March 14, 2008. Food prices have come under pressure because of the increased demand for corn in ethanol production. [Agencies]

In another sign of troubles in housing, construction of new homes fell by a larger-than-expected 0.6 percent in February to an annual rate of 1.065 million units.

The Labor Department reported Tuesday that wholesale prices were up 0.3 percent last month, following an even bigger 1 percent jump in January.

Outside of food and energy, the rise in inflation was a troubling 0.5 percent, the biggest increase for core inflation since a rise of 0.9 percent in November 2006.

The hefty February increase in core inflation raises concerns that relentless increases in energy costs over the past two years are beginning to spread to other areas of the economy.

That could act as a constraint on the Federal Reserve, which is trying to combat a serious economic slowdown by cutting interest rates to jump-start economic growth.

However, if inflation starts to be a problem, the Fed could be caught in the grips of stagflation, the malady of stagnant growth occurring at the same time that inflation is rising.

The February rise in wholesale prices reflected higher costs not only for energy but also for cars and light trucks as well as a 1.3 percent jump in prescription drug prices.

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