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Costs rise for manufacturers

The producer price index (PPI), formerly the wholesale price index, rose its steepest in 14 months in January, increasing 0.6 percent over the December level. This reflected higher prices for food.

The increase, reported Friday by the Bureau of Labor Statistics, put inflation at the wholesale level 1.9 percent higher than it was in January 1983. The index went up only 0.6 percent all of last year - a 19-year low.

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Businesses usually have to pass along higher raw-material prices to customers in the form of higher retail prices. Consequently, changes in the PPI often result in changes for consumers (which show up in the consumer price index - CPI) two or three months up the road.

The PPI is based on a 1967 level of 100. January's level was more than 21/2 times the prices producers spent for goods in 1967.

When most people refer to the PPI, which tracks 2,800 representative commodities reported by 7,000 companies, they mean the finished-goods index. This consists of any goods already processed and ready for sale to the ultimate user.

The PPI was introduced in 1902. A different data collection system used for the CPI index is expected to send the PPI index up sharply when it is next reported on Feb. 24.

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