Updated from 9:06 a.m. EDT

In perhaps the first sign that rising oil prices could lead to general price inflation, the high cost of energy drove wholesale prices to their highest level in seven months in September.

Even excluding the often-volatile energy and food components, prices rose much quicker than expected in September, offering evidence that inflation may not be as benign as previously thought and wiping out any hope that the Federal Reserve's next move would be to cut interest rates.

The

producer price index

, a broad measure of business-to-business prices for goods and services in the U.S., rose 0.9% in September, the

Labor Department

said Friday, after

declining 0.2% in August. The core index, which takes out food and energy, rose 0.3%.

"Foreboding: That's the only word for today's report," said Oscar Gonzalez, an economist at

John Hancock Financial Services

. "We could be facing our worst-case scenario -- rising inflation in a slowing economy. I think reality is that if oil prices don't come down soon, the inflation outlook and the broader economic outlook grows dimmer."

Economists expected the main index to rise 0.5%, and the core index to climb 0.1%, according to a poll conducted by

Reuters

.

Another economist was less pessimistic, saying that prices are still relatively low. "Core crude goods prices rose for the first time in seven months, although the 0.3% month-on-month paled in comparison with the cumulative 6.2% drop in the previous six months," said James O'Sullivan, an economist at

J.P. Morgan

.

At the same time consumer spending remained robust.

Retail sales

posted a larger-than-expected gain in September, the

Commerce Department

reported Friday. Retail sales rose 0.9% in September, compared with a 0.2% rise in August. Excluding automobiles, sales increased 0.7%.

According to a

Reuters

poll, economists expected a 0.6% jump in overall retail sales, and a 0.5% rise excluding autos.

However, economists see consumer spending slowing in the coming months, on the heels of a falling stock market. "The sharp declines in equity wealth over the last month and higher energy prices will constrain consumer spending in the months ahead," said Stan Shipley, senior economist at

Merrill Lynch

.