April 18 (Bloomberg) -- Producer prices in the U.S. probably rose last month as costs of crude oil and gasoline approached record highs, while a report on home construction may reflect more weakness in the housing market.

Wholesale prices last month increased 0.4 percent after a 1.4 percent decline, according to the median estimate in a survey of economists before the Labor Department's report. Excluding fuel and food, growth in prices probably slowed from the previous month, reflecting reluctance at many companies to risk losing market share by passing on all of their costs.

Basic materials prices are being watched by Federal Reserve officials, who said in their March 28 statement that ``other commodities,'' in addition to oil, have the ``potential to add to inflation pressures.'' Investors will learn more about the central banker's inflation concerns with the release today of minutes from their March meeting.

``It's clear that we've seen some pass-through of raw materials costs to producer prices, but retail inflation is still restrained,'' said Haseeb Ahmed, an economist at JPMorgan Chase & Co. in New York.

Prices of so-called crude materials, such as iron, scrap steel, timber and raw cotton, rose 11.9 percent in the 12 months ended in February, the biggest year-over-year gain since January 2005.

The government is scheduled to release the producer price report at 8:30 a.m. in Washington. Forecasts for the overall figure range from a decline of 0.2 percent to a 1 percent increase. Core producer prices, which exclude fuel and food, probably rose 0.2 percent after 0.3 percent increase in February, the survey showed.

Housing Demand

Concerns that inflation may accelerate in coming months are pushing up borrowing costs and slowing housing demand, which has been a mainstay of the economic expansion.

The Commerce Department's report on building starts, also set for 8:30 a.m. in Washington, may show builders broke ground on 2.025 million new homes at an annual rate last month, down from February's 2.12 million,

Crude oil futures on the New York Mercantile Exchange yesterday surpassed $70 a barrel, reaching a seven-month high. Futures reached a record $70.85 on Aug. 30, the day after Hurricane Katrina struck production platforms and refineries along the U.S. Gulf Coast.

Retail unleaded gasoline averaged $2.43 a gallon last month, up from $2.27 for all of last year. Gas averaged $2.683 a gallon last week.

Fed's Moskow

Michael Moskow, president of the Chicago Fed bank, said the Fed needs to be `vigilant'' to ensure energy and commodity prices don't fuel inflation.

``We need to make sure that increases in resource utilization or prices of energy and other commodities do not add to inflationary pressures or increase inflation expectations,'' Moskow said yesterday in remarks yesterday to local business leaders in Des Moines, Iowa. Moskow is not a voting member this year of the Fed's rate-setting Open Market Committee.

Economists estimate core producer prices rose 1.7 percent from March 2005, matching the year-over-year increase in February. In July 2005, it reached a high of 2.8 percent. The 12-month increase in core producer prices has averaged about 1.1 percent the past decade.

All 41 economists surveyed by Bloomberg News expect the Fed to raise its rate for a 16th consecutive time on May 10, to 5 percent, to ensure inflation doesn't accelerate. A separate Bloomberg survey on April 3-7 showed that economists expect policy makers to hold the rate at 5 percent through the first half of 2007.

`Stopping Point'

Fed Governor Susan Bies said in a speech in Los Angeles last week that policy makers agree the central bank is ``getting closer to the stopping point.''

General Motors Corp. and Ford Motor Co. have reduced prices on some vehicles to revitalize sales and pare excess inventory.

Detroit-based GM hopes to increase profit through a combination of reduced sticker prices, less-generous incentives and fewer sales to rental-car fleets. Last month, the automaker's incentives declined 25 percent from a year earlier, according to Autodata. GM's U.S. sales in March fell 14 percent.

Still, some companies are having success passing on higher costs and some economists say that poses a risk of accelerating inflation.

Middletown, Ohio-based AK Steel Corp., the third-largest U.S. producer, said April 5 that it will increase prices for stainless steel products starting April 30, and AMR Corp.'s American Airlines, the world's largest carrier, this month joined U.S. rivals in raising some fares $50 each way.

Demand `Is Strong'

``Demand around the world and the United States is strong,'' said Daniel Dimicco, chief executive officer of Nucor Corp., the second-largest producer after U.S. Steel Corp. ``Raw material costs are driving steel pricing right along with demand.''

Rising costs for those goods used in earlier stages of production, are ``consistent with our overall view that core consumer price inflation will tick up towards the end of the year,'' said Drew Matus, a senior economist at Lehman Brothers Holdings Inc. in New York.

The consumer price index probably rose 0.4 percent in March, after a 0.1 percent gain the prior month, according to the median forecast in a Bloomberg News survey before a Labor Department's report tomorrow. Excluding food and energy, core prices rose 0.2 percent after a 0.1 percent gain, the survey showed.

                      Bloomberg Survey

    FIRM                       PPI      PPI    Housing   Build
                                       Core    Starts  Permits
   -----------------------------------------------------------
   Number of replies           64       62       56       25
   MEDIAN                     0.4%     0.2%    2.025    2.100
   AVERAGE                    0.4%     0.2%    2.028    2.083
   High Forecast              1.0%     0.4%    2.150    2.210
   Low Forecast              -0.2%     0.0%    1.900    1.930
   Previous                  -1.4%     0.3%    2.120    2.179
   -----------------------------------------------------------
   ABN Amro                   0.2%     0.0%    2.078     n/a
   4CAST Ltd.                -0.2%     0.2%    1.950    1.980
   Action Economics           0.4%     0.1%    2.050    2.120
   AIG Global Invest.         0.3%     0.2%    1.950     n/a
   Alleti Gestielle SGR       0.3%     0.1%    2.090    2.160
   Argus Research Corp.       0.7%     0.3%    2.150     n/a
   BBVA                       0.4%     0.2%    2.000    2.070
   B of A Securities          0.5%     0.2%    2.010     n/a
   Bantleon Bank AG           0.2%     n/a      n/a      n/a
   Barclays Capital           0.3%     0.2%    2.075     n/a
   Bayerische Landesbank      0.6%     0.2%     n/a      n/a
   Bank of Tokyo- Mitsub.     0.3%     0.0%    2.062    2.146
   Briefing.com               0.4%     0.1%    2.090    2.110
   CantorViewpoint            0.4%     0.1%    2.090    2.090
   CIBC World Markets         0.4%     0.2%    2.100     n/a
   Citigroup                  0.3%     0.2%    2.020    2.050
   ClearView Economics        0.6%     0.3%    1.980     n/a
   Commerzbank                0.4%     0.2%    2.050    2.140
   Credit Suisse              1.0%     0.2%    2.000     n/a
   Cube Financial             0.3%     0.2%     n/a      n/a
   Daiwa Securities           0.4%     0.2%    2.000     n/a
   Danske Bank                0.3%     0.3%     n/a      n/a
   DekaBank                   0.3%     0.2%    2.030    2.100
   Desjardins Group           0.4%     0.2%    2.080    2.100
   Deutsche Bank Research     0.2%     0.0%    2.000    2.100
   Deutsche PostBank          0.5%     0.2%     n/a      n/a
   Dresdner Kleinwort         1.0%     0.3%    1.990     n/a
   FTN Financial              0.6%     0.2%    1.999    2.114
   First Trust Advisors       0.4%     0.2%    2.050     n/a
   Fortis Bank NV             0.7%     0.2%    2.000     n/a
   Global Insight             0.1%     0.2%    1.979     n/a
   Goldman Sachs              0.4%     0.1%    2.120     n/a
   High Frequency Economics   0.6%     0.1%    1.900     n/a
   HSBC Markets               0.5%     n/a      n/a      n/a
   HypoVereinsbank            0.5%     0.2%    2.000    2.000
   I.D.E.A.                   0.2%     0.1%     n/a      n/a
   ING Financial Markets      0.4%     0.2%    1.950     n/a
   Informa Global Markets     0.4%     0.2%    1.975     n/a
   Insight Economics          0.5%     0.2%    2.050     n/a
   IntesaBci                  0.0%     0.2%    2.000    2.100
   IXIS-CIB                   0.5%     0.4%    2.000     n/a
   J.P. Morgan                0.4%     0.3%    2.030    2.040
   JPMorgan Asset Mg          0.5%     0.2%    2.100    2.150
   Lehman Brothers            0.5%     0.3%    2.050     n/a
   Macroeconomic              0.6%     0.2%    2.000     n/a
   Merrill Lynch              0.5%     0.2%    2.040    2.100
   Mizuho Securities          0.4%     0.2%    2.000     n/a
   Moody's Economy.com        0.3%     0.2%    2.050     n/a
   Morgan Stanley             0.1%     0.2%    2.000     n/a
   National Bank Financial    0.5%     0.2%    1.975     n/a
   National City Bank         0.1%     0.1%    2.130    2.210
   Nesbitt Burns BMO          0.4%     0.2%    2.080    2.140
   Nomura                     0.1%     0.2%    2.065    2.050
   Nord/LB                   -0.2%     0.0%     n/a      n/a
   PNC Bank                   0.5%     0.2%    1.980     n/a
   RBS Greenwich Capital      0.8%     0.3%    2.000     n/a
   Ried, Thunberg & Co.       0.6%     0.2%    2.050     n/a
   Scotia Capital             0.2%     0.2%    2.050     n/a
   Societe Generale           0.5%     0.2%    1.980     n/a
   Stone & McCarthy          -0.1%     0.2%    2.120     n/a
   Thomson/IFR                0.2%     0.2%    2.050    2.060
   UBS Securities LLC        -0.2%     0.2%    1.900    1.950
   Wells Fargo                0.4%     0.1%    2.050    1.930
   Wrightson                  0.2%     0.0%    2.000    2.070

To contact the reporter on this story: Joe Richter in Washington at Jrichter1@bloomberg.net

Last Updated: April 18, 2006 00:14 EDT