U.S. wholesale prices rose last month, even as energy and food costs moderated, leading traders to wonder whether inflation may be picking up steam.

The U.S. Labor Department said today its producer-price index for finished goods rose 0.3% in January after declining 0.3% in December.

The reading on core producer prices, which strips out typically volatile food and energy expenses, rose by 0.8%. The core increase was the biggest since a 1% jump in December 1998.

Economists had called for a 0.3% slide in the overall index and a slim 0.2% gain in core prices.

The overall reading was restrained by moderation in energy and food costs, which had pushed up wholesale prices for most of 2004. Energy prices fell 1% last month after a 2.5% drop in December; food prices slipped 0.2% after a 0.1% rise in December.

On a year-over-year basis, the overall PPI index rose 4.2%.

The rise in core prices was led by 3.4% jump in the cigarette prices, the biggest since April 2002, and a 2.8% rise in prices of alcoholic beverages, the biggest since May 2000. Prices of passenger cars rose 1.2%, the biggest rise since March 2003.

Meanwhile, the University of Michigan’s preliminary consumer-sentiment index for February slipped to 94.2 from 95.5 in January. The index was 97.1 in December.