Today's inflation news was not quite as friendly as it appeared. But truly friendly data may be on the way.

The

Producer Price Index

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), which measures the prices of goods purchased at the wholesale level, rose 0.4% in October, the

Bureau of Labor Statistics

reported.

That wasn't the friendly-looking part. Economists polled by

Reuters

had forecast a gain of just 0.1%, on average.

Why they missed: Volatile food and energy prices both rose sharply. Led by eggs, food prices gained 0.8%, their biggest increase in six months, while energy prices rose 1.4%. Gasoline and fuel oil prices fell, but not as much as electricity and natural gas prices rose.

The friendly-looking part was the core PPI, which strips out food and energy prices. It fell 0.1%, compared to an average forecast for it to rise 0.1%. This pulled the core PPI growth rate down to 1%, the slowest in the last eight months, from 1.2% in September.

The growth rate of the overall CPI rose to 3.6% from 3.3% in September.

The change in the core PPI was less friendly than appeared because it was skewed by big drops in the prices of cars (1.8%) and trucks (1.2%), due in part to some aggressive discounting of old model year vehicles, according to

Barclays Capital

economist Henry Willmore. He figures that excluding auto prices, the core PPI rose 0.3%.

But while the October core PPI was dragged down by falling auto prices, the September core PPI was inflated by them. A 1.4% increase in car prices contributed to the core PPI's 0.3% rise in September,

Daiwa Securities

chief economist Michael Moran points out.

The truth lies somewhere in between, economists say. "The September rise of 0.3% was an overstatement of core inflation at the producer level, and the drop of 0.1% in October was an understatement," Moran said in a research note. "The average change of 0.1% over the past two months provides the best read on underlying trends in the core PPI."

Friendlier inflation data may be on the way if the

Future Inflation Gauge

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chart ) is on the money. This influential measure of factors has declined in each of the last six months.

Anirvan Banerji, director of research for the

Economic Cycle Research Institute

, says that's because the global industrial economy is slowing down in response to interest rate hikes. "When you have a global industrial slowdown, at the margin you have a changing balance of supply and demand," he says. "Demand growth relative to supply growth is definitely falling." The clearest indications of that, Banerji says, are declines in non-oil import prices, falling industrial commodity prices and a slowdown in real-estate lending.

The larger-than-expected increase in the overall PPI for October is prompting economists to up their estimates for how much the overall

Consumer Price Index

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), to be released next Thursday, will rise. Barclays' Willmore, for example, forecast an increase of 0.3%, instead of 0.2%.

But the drop in the core PPI is not lowering estimates for the core CPI because the two indicators look at different measures of auto price changes. Changes in manufacturers' prices show up in both places, but changes in dealer prices show up only in the CPI. This can result in very different measures of auto prices changes in the two indices.

Jobless Claims Spike

Separately, the weekly tally of

initial jobless claims

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) spiked to 344,000 in the latest week, the biggest number recorded since January 1999. But this too was not quite what it seemed.

A "substantial" portion of the claims -- the

Labor Department

will provide more information next week, a spokeswoman said -- was due to temporary layoffs in the auto industry.

DaimlerChrysler

(DCX)

last week temporarily idled several factories because of insufficient orders from dealers. This isn't common, but it's not rare either. In any case, it probably marks the most recent initial jobless claims data as an aberration.