American businesses faced the biggest annual jump in wholesale prices in 27 years last month, just as the stumbling economy caused consumer spending to drop.

    While the challenges are expected to make it more difficult for businesses to raise prices and maintain profit margins, they also underscore the pressure on Federal Reserve policy makers as they consider whether to raise rates.

    "Hot inflation and cool housing leaves the F.O.M.C. stuck in neutral for now," said Stuart Hoffman, chief economist at PNC Bank, in a note, referring to the Federal Open Market Committee, the central bank's policy-making body.

    The 1.2 percent rise in wholesale prices, reported on Tuesday by the Labor Department, was well above economists' expectations and the latest report showing a sharp rise in inflation in July. Some of the higher prices have tapered off because of the recent decline in crude oil prices.

    But American businesses and consumers, along with central bankers, are facing an increasingly difficult situation. Businesses can raise retail prices and risk losing customers who are already squeezed by the downturn. Or they can eat the cost of more expensive goods and lose profits.

    Fed officials, meanwhile, could raise interest rates to choke off inflation. But higher rates would likely exacerbate the risks to economic growth, like the tight credit market and the housing slump. Last month, housing construction fell to its lowest pace in more than 17 years, according to a separate government report released on Tuesday.

    Outside of food and fuel, businesses paid 0.7 percent more for so-called "core" goods, especially automobile parts, industrial equipment and prescription drugs.

    The annual increase in overall prices, including energy, was 9.8 percent, the biggest 12-month jump since the deep recession of the early 1980s.

    The Producer Price Index is considered a glimpse at what Americans may be forced to pay for consumer goods in the near future. Businesses that face higher costs along the production chain usually try to pass those costs onto customers.

    The report presented the specter that consumer prices could rise higher in the fall and winter. Inflation reached a 17-year high last month, according to the Consumer Price Index.

    But some analysts said that the slowdown in the economy meant that consumers would be less willing to put up with significant sticker shock.

    "Given the weak nature of domestic demand now and going forward, it is likely that businesses will have increasing difficulty raising prices to consumers," Joshua Shapiro, an economist at the research firm MFR, wrote in a note. Tuesday's economic news appeared to depress investors, and the Standard & Poor's 500-stock index was off about 0.9 percent in early trading.

    Further up the production chain, intermediate goods rose 2.7 percent last month, and crude goods rose 4.2 percent. These data are more volatile from month to month.

    In a separate report on Tuesday, the Commerce Department said that groundbreakings for homes fell in July, as builders continued to cut back on residential construction projects in the face of the housing slump.

    In June, data showed a big bump in permits for new homes and groundbreakings, which are referred to as "housing starts" by economists. That was a statistical anomaly stemming from a new set of zoning regulations in New York City, which led to a flurry of activity to start apartment projects.

    In July, the data readjusted itself, to the tune of a 17.7 percent decline in permits, which ran at a 937,000 annual rate, and an 11 percent decline in starts, which fell to a 965,000 annual rate. (All data are seasonally adjusted.)

    A less distorted view of the market for housing development came from the single-family figures, which were not affected by the bump in Manhattan. In July, single-family permits dipped 5.2 percent, and starts fell 2.9 percent.

    Over all, the report presented more signs of stagnation in the housing sector, with builders more concerned about selling their existing inventory than starting new projects in an unwelcoming market.

    Midwestern and Southern states saw more construction activity than those in the Northeast and West.

    An earlier version of this article misstated the rise in wholesale prices in July. It was 1.2 percent, not 1.8 percent, which was the increase in June.