US producer prices up; consumer morale at nine-month high
washington — US producer prices recorded their largest increase in nine months in March as the cost of food and trade services surged, pointing to some pockets of inflation at the factory gate.
Other data on Friday showed consumer sentiment hit a ninemonth high in April, strengthening views economic activity was regaining momentum after a weather-induced lull early this year.
The Labor Department said its seasonally adjusted producer price index for final demand increased 0.5 per cent last month, the largest increase since June last year, after slipping 0.1 per cent in February.
Economists, who has expected prices received by the nation’s farms, factories and refineries to gain only 0.1 per cent, were puzzled by the increase last month.
The government has revamped the PPI series to include services and construction. The series’ short history makes it difficult to gauge a trend.
“It could be that the difficult weather over the past few months has distorted prices, and wholesale inflation will settle down in April,” said Gus Faucher, a senior economist at PNC Financial Services in Pittsburgh.
“But there is also the possibility that inflation may be picking up, as firms raise prices given the recent limited acceleration in wage growth and stronger demand.”
Producer prices excluding volatile food and energy costs rose 0.6 per cent, the biggest rise since March 2011. The so-called core PPI for final demand had declined 0.2 per cent in February.
The broader PPI will over time track closely the Consumer Price Index. Inflation has been running very low, allowing the Federal Reserve to maintain its expansionary monetary policy to nurse the economy.
A separate report showed the Thomson Reuters/University of Michigan’s consumer sentiment index rose to 82.6 in early April, the highest since July, from 80.0 in March.
“We suspect that improving weather conditions and a more optimistic outlook on the economy and labor markets contributed to the rebound in consumer optimism,” said Gennadiy Goldberg an economist at TD Securities in New York.
US financial markets were little moved by the data.