Wholesale prices shot up 1.6 percent in September on record gasoline costs while retail sales gained 1.1 percent, driven by petroleum and automobiles, the government said Friday.

The huge jump in the producer price index - in line with economists' estimates - follows a hike of 1.3 percent in August in the aftermath of Iraq's invasion of Kuwait and a dip of 0.1 percent in July.Allen Sinai, chief economist at the Boston Co., called the price surge "horrendous" and "disturbing." Robert Dederick, chief economist at Northern Trust in Chicago, labeled the wholesale jump "absolutely devastating."

A 4.9 percent increase in September retail sales at gasoline stations, meanwhile, reflected higher costs in the weeks following Iraq's conquest and jitters that have sent world oil prices to beyond $40 a barrel.

Despite recession fears, the 2.9 percent surge in sales by automotive dealers reflects continued strength in consumer spending, the driving force in the nation's longest post-war economic expansion.

"The consumer was not caving in," Sinai said, but he warned, "this may be the last hurrah" as prices spiral.

A Labor Department spokesman said a 20.6 percent jump in wholesale gasoline prices in September was the largest on record. Home heating oil also contributed to higher wholesale prices, advancing 21.6 percent.

Even though the department said that September's energy prices surged 13.8 percent, food prices were off 0.9 percent. Not counting food and energy, the index was up 0.6 percent.

The Commerce Department said the 1.1 percent gain in retail sales in September follows a decline of 0.4 percent in August and an advance of 0.5 percent in July. Without gasoline, September sales increased 0.8 percent.

If U.S. wholesale prices were to continue increasing at their current pace, inflation at the producer level would be running at 20.9 percent, a government spokesman said.

For the first nine months of the year, wholesale prices have climbed 6.3 percent, and the increase over the last two months is the biggest since 1980, the spokesman said.