U.S. producer prices grew more than estimated in March, as the cost of services rose by the biggest margin in four years.
The producer-price index rose 0.5 percent in the month, its biggest advance since last June, reported the Labor Department on Friday. The prices had earlier declined 0.1 percent in February. This exceeded the median estimate of an increase of 0.1 percent in a Bloomberg survey. Wholesale prices have gained 1.4 percent over the past year.
Rising prices at food wholesales and jewelry and clothing retailers contributed to the growth in services, helping offset stagnating commodity costs. As inflation remains well below Federal Reserve’s target, the central bank will probably keep benchmark interest rates low in a bid to boost growth.
“The Fed doesn’t want inflation to rise dramatically, it just wants signs that it’s coming up some,” David Berson, a Columbus, Ohio-based chief economist at Nationwide Insurance, told Bloomberg. “We’ll move in that direction, we’re just not there yet.”
Core wholesale prices, which are adjusted for the volatile energy and food prices, rose 0.6 percent, the largest advance March 2011. This surpassed the median estimate of a 0.2 percent gain in a Bloomberg survey of economists. The prices had earlier plunged 0.2 percent in February.
The annualized gain in producer prices in March was largest since last August, and comes after a 0.9 percent growth in the year ending February. Minus energy and food, the index rose 1.4 percent in the year ending March, compared to a 1.1 percent gain in the 12 months ended February.
Wholesale food prices in March rose 1.1 percent, driven by surging meat costs, including sausage and pork. Energy cost plunged 1.2 percent in the same period. The cost of services in March rose 0.7 percent, the strongest advance since January 2010. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter
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