The July price pressures reflected in part the surge in energy costs that pushed crude-oil and gasoline prices to record highs. Crude-oil prices have fallen by more than $30 per barrel since then, raising hopes that inflation pressures will soon ease.

But the price spikes seen elsewhere in July prompted concerns that the prolonged surge in energy was beginning to show up more broadly throughout the economy, and that while prices may rise quickly, they tend to come back down much more slowly.

"Inflation is way too hot," said Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pa. "It took a long time for the surge in commodity prices to seep into the general economy so don't expect one month of commodity price declines to suddenly turn off the inflation pump."

But other economists said they believed the July inflation report could represent the worst for inflation pressures this year if — and they concede this is a big if — energy prices continue to decline in coming months.

"A firmer dollar, retreating commodity prices and continued economic weakness should damp inflation by the fall," said Sal Guatieri, an economist at BMO Capital Markets in Toronto, who said he looked for elevated inflation numbers at both the consumer and wholesale levels for another month before they start declining.

Economists saw a silver lining in the continued plunge in housing construction, saying it is needed to help reduce the glut of unsold properties as builders compete with foreclosed homes selling at steep price discounts.

In Crawford, Texas, where President Bush is vacationing, spokesman Tony Fratto said the big jump in July producer prices did not "reflect the recent significant fall in oil prices, which everyone would like to see continue."

The Federal Reserve is caught between a slumping economy, as reflected by the further plunge in housing construction, and the big jump in inflation pressures, which has some Fed officials lobbying for the central bank to start boosting interest rates.

The Fed, which aggressively cut interest rates from last September through April, has held rates unchanged at meetings in June and earlier this month. Richard Fisher, president of the Fed's Dallas regional bank, dissented at both those meetings, arguing the central bank should start raising interest rates to make sure the inflation surge does not become embedded in the economy.

"We cannot afford to gamble away our credibility," Fisher said Tuesday in a speech in Colorado. He warned that the recent burst of inflation could threaten the economy as "a lingering inflationary fever."