Dec. 19 (Bloomberg) -- Prices paid to U.S. producers rose in November by the most since 1974, led by rebounds in the costs of energy and light trucks. Prices excluding food and energy increased more than forecast.

The 2 percent gain in the producer price index was more than forecast and followed a 1.6 percent decrease in October, the Labor Department said today in Washington. Excluding food and energy, the so-called core rate rose 1.3 percent last month, the most since July 1980, after falling 0.9 percent.

The gain in wholesale prices partly explains why Federal Reserve policy makers maintain the view that inflation risks remain a threat to the economic expansion. A report last week on consumer prices showed that businesses are having limited success passing on higher materials costs.

``Inflation is still a little too high,'' David Sloan, chief U.S. markets economist at 4Cast.com in New York, said before the report. ``The market may look at this as a reminder that there's still an inflation risk.''

Economists had expected producer prices to rise 0.5 percent, according to the median of 65 forecasts in a Bloomberg News survey. Estimates ranged from a 0.2 percent decline to a 1.7 percent rise. Core prices were expected to rise 0.2 percent.

Without rounding the monthly figures, core inflation at the producer level increased 1.268 percent after falling 0.880 percent.

So far this year, producer prices are rising at a 0.3 percent annual rate, compared with 5.3 percent in the same 11 months of 2005. Core prices are rising at a 2 percent rate, after a 1.6 percent pace during the same period last year.

November 2005

Producer prices were up 0.9 percent from November 2005, compared with a 0.6 percent rise in the 12 months ended in October.

Prices excluding food and energy rose 1.8 percent from a year earlier, the biggest year-over-year rise since October 2005, compared with a 0.6 percent increase in the 12 months ended in October.

Energy prices jumped 6.1 percent last month, the most since February 2003, after decreasing 5 percent in October. The price of gasoline surged 17.9 percent, the biggest rise since June 2000, and natural gas costs rose 5.9 percent.

The government asks survey participants to report prices for the Tuesday of the week that includes the 13th. On that basis, natural gas futures prices on the New York Mercantile Exchange rose to $7.98 per million British thermal units last month, from $6.47 in October.

Food Prices Rise

Food prices rose 0.1 percent after a 0.8 percent decline in October, the Labor Department said.

Costs of intermediate goods, those used in earlier stages of production, rose 0.7 percent last month. They were up 2.4 percent in the 12 months ended in November. Prices for raw materials, or so-called crude goods, jumped 15.7 percent and were down 8.5 percent since November 2005.

Excluding food and energy, intermediate prices fell 0.3 percent after no change in October. Compared with a year ago, core intermediate goods costs rose 5.1 percent.

Core crude goods prices rose 0.5 percent from a month earlier.

Prices for passenger cars increased 2.2 percent after dropping 2.3 percent in October. Costs of light trucks surged a record 13.7 percent after falling a record 9.7 percent.

Capital Equipment

Prices for capital equipment rose 1.4 percent in November after a 0.9 percent decrease the month before. Computer prices rose 0.3 percent.

The producer price index is one of three monthly inflation gauges reported by the Labor Department.

The department said last week that its consumer price index held steady in November after a 0.5 percent drop in October. Core prices that exclude food and energy were also unchanged, the first month without a gain since June 2005.

Fed policy makers have left the benchmark interest rate target unchanged at 5.25 percent at their past four meetings, after raising it 17 straight times since June 2004. The economy seems likely to expand at a ``moderate pace on balance over coming quarters,'' they said in a statement Dec. 12.

``Readings on core inflation have been elevated, and the high level of resource utilization has the potential to sustain inflation pressures,'' according to the Fed statement. ``However, inflation pressures seem likely to moderate over time,'' in part reflecting the reduced impetus from energy prices and the effects of past rate increases.

Growth Forecasts

The economy will expand at an annual rate of 2 percent this quarter, based on the median estimate of economists surveyed by Bloomberg News from Dec. 1 to Dec. 8. That compares with a 2.2 percent rate in the third quarter that was the smallest rise this year.

Price pressures are increasing in some industries even as the growth slows.

AK Steel Corp., the third-biggest U.S. steelmaker, said last month it will add a $135 per ton surcharge to invoices for electrical-steel products shipped in December. Middletown, Ohio- based AK Steel said its surcharges are based ``on reported prices for raw materials and energy used'' to make products, with October purchase costs used to determine the December surcharges.

Other companies are having trouble boosting prices.

Steel Dynamics Inc., the third-largest U.S. steelmaker, last week cut its fourth-quarter profit forecast after a greater-than- expected drop in selling prices for flat-rolled steel and fewer orders. Lower prices also led Nucor Corp., the second-biggest U.S. steelmaker, to reduce its profit forecast the same week.

To contact the reporter on this story: Shobhana Chandra in Washington schandra1@bloomberg.net

Last Updated: December 19, 2006 08:30 EST