Wholesale Prices in U.S. Rise More-Than-Forecast 0.8%, Led by Food, Energy

Wholesale costs in the U.S. rose more than forecast in April, led by higher prices for food and fuel.

The 0.8 percent increase in the producer-price index compares with the 0.6 percent median estimate of economists surveyed by Bloomberg News, Labor Department figures showed today in Washington. The core measure, which excludes volatile food and energy costs, climbed 0.3 percent, more than projected.

Rising costs may lead businesses such as Whole Foods Market Inc. (WFMI) to increase prices, boosting the cost of living for American consumers. At the same time, Federal Reserve Chairman Ben S. Bernanke said he expects commodity prices to moderate.

“Inflation really shouldn’t be much of a concern beyond food and energy prices, and that’s going to be more of a near- term phenomenon,” said Sean Incremona, a senior economist at 4Cast Inc. in New York who accurately forecast the gains. “The core is very gradually moving higher, but it doesn’t look to be running away anytime soon.”

A separate report today from the Commerce Department showed that retail sales rose 0.5 percent in April, reflecting gains at service stations and grocery stores. The increase was the smallest since July and followed a 0.9 percent March gain that was more than double the previous estimate. Sales excluding automobiles and gasoline increased 0.2 percent.

Treasuries, Stocks

Stock-index futures held earlier losses after the reports. The contract on the Standard & Poor’s 500 Index fell 0.5 percent to 1,332.2 at 8:51 a.m. in New York. Treasury securities fell, sending the yield on the benchmark 10-year note up to 3.17 percent from 3.16 percent late yesterday.

Estimates for producer prices were based on forecasts from 72 economists in a Bloomberg survey. Projections ranged from gains of 0.3 percent to 1.3 percent, after a 0.7 percent rise in March.

Another Labor Department report today showed fewer Americans filed first-time claims for unemployment insurance last week. Applications for jobless benefits fell 44,000 in the week ended May 7 to 434,000.

Wholesale prices excluding volatile food and energy costs were projected to rise 0.2 percent from the prior month, the Bloomberg survey showed. The core index rose 0.3 percent in March.

Compared with a year earlier, companies paid 6.8 percent more for goods last month, the most since September 2008, after a 5.8 percent rise in March.

Core wholesale prices climbed 2.1 percent in the 12 months ended in April, the most since August 2009.

Energy Costs

Energy costs rose 2.5 percent as gasoline prices climbed 3.6 percent. Companies were charged 0.6 percent more for light motor trucks, while prices for passenger cars increased 0.5 percent.

The cost of food increased 0.3 percent, led by dairy products, after a 0.2 percent decline in March.

Producer prices are calculated based on costs on the Tuesday of the week containing the 13th of the month, which may influence month-to-month changes.

Expenses for intermediate goods rose 1.3 percent from the prior month, while prices of crude goods increased 4 percent.

“Increases in commodity prices are in turn boosting overall consumer inflation,” Bernanke said last month at a press conference in Washington. “However, measures of underlying inflation, though having increased modestly in recent months, remain subdued, and longer-term inflation expectations have remained stable.”

Preferred Gauge

The central bank’s preferred price gauge, which excludes food and fuel, rose 0.9 percent in March from a year earlier. Fed policy makers aim for long-run overall inflation of 1.7 percent to 2 percent.

Prices may continue to climb later this year, according to A.C. Gallo, president and chief operating officer of Whole Foods, the largest U.S. natural-goods grocer. Beef, dairy, corn and soy are major among commodities experiencing inflation, said the executive of the Austin, Texas-based company.

“We have been able to pass some of them through,” Gallo said in a May 4 earnings call with analysts, referring to cost increases. “There is some uncertainty based on not quite understanding what kind of inflation we’ll be seeing in our costs and what will be able to pass through.”

Producer prices are one of three monthly inflation gauges reported by the Labor Department. Prices of goods imported into the U.S. climbed 2.2 percent in April from the prior month, data showed this week. Imported food costs were up 20 percent from a year earlier, the biggest 12-month increase since records began in 1977.

Consumer prices, the broadest of the three measures, rose 0.4 percent in April and the core index had a 0.2 percent gain, according to the median forecasts of economists surveyed by Bloomberg before a Labor Department report tomorrow.

To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net

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