U.S. Producer Costs Minus Food, Fuel Rise More Than Forecast

Wholesale prices in the U.S. excluding food and fuel rose more than forecast in March, led by a pickup in the costs of light trucks and soaps.

The so-called core producer price index climbed 0.3 percent after a 0.2 percent rise, Labor Department figures showed today in Washington. Economists projected a 0.2 percent gain, according to the median estimate in a Bloomberg News survey. The overall gauge was little changed after a 0.4 percent rise.

Fuel costs advanced more slowly last month, supporting the Federal Reserve’s view that the recent surge in energy prices will be temporary. With diminished inflationary pressure from energy, producers will probably find less reason to pass expenses to consumers, who are facing slow income growth.

“Energy prices typically rise quicker than they did this particular month,” Kevin Cummins, an economist at UBS Securities LLC in Stamford, Connecticut, said before the report. “Looking at the overall trend for producers, there doesn’t seem to be any sign of a major pickup in finished good prices.”

Another report from the Labor Department showed initial jobless claims rose by 13,000 to 380,000 in the week ended April 7, the highest since Jan. 28 and a sign the pace of improvement in the labor market is slowing. The median forecast in a Bloomberg survey called for 355,000 claims.

Stock-index futures trimmed gains after the figures. The contract on the Standard & Poor’s 500 Index expiring in June rose less than 0.1 percent to 1,364.7 at 8:48 a.m. in New York, after rising as much as 0.6 percent earlier.

Estimates of the 72 economists surveyed by Bloomberg for the overall producer price index ranged from a decrease of 0.4 percent to an increase of 1.5 percent.

Year Ago

In the 12 months ended March 2012, companies paid 2.8 percent more for goods, the smallest gain since the year ended June 2010. The core index increased 2.9 percent over the past year.

The cost of diesel fuel fell 6.3 percent, and gasoline prices dropped 2 percent, the report showed.

More than one-third of the increase in core prices in March was attributable to a 0.7 percent gain in the cost of light trucks, the report said. Prices of soaps and detergents jumped 2.1 percent, the biggest gain since July.

The cost of passenger cars rose 0.8 percent last month, the most since November.

Prices of capital goods rose 0.2 percent last month after a 0.1 percent rise in February.

Oil Prices

Oil prices have retreated after reaching the highest level this year. Brent oil for May delivery has dropped 5 percent through yesterday’s close since from a peak of $126.22 a barrel on March 13.

“The recent increase in oil and gasoline prices will push up inflation temporarily, but the Committee anticipates that subsequently inflation will run at or below the rate that it judges most consistent with its dual mandate,” the Federal Open Market Committee said in the minutes of its March 13 meeting.

The central bank officials indicated they will probably hold off on more monetary accommodation unless prices rise more slowly than their 2 percent target or the economic expansion falters, according to the minutes. Their preferred price gauge, tied to consumer spending and issued by the Commerce Department, rose 2.3 percent in the year ended in February.

Raw Materials

At the same time, gains in commodity prices over the past year are making it difficult for some companies.

“We continue to experience increases in the cost of raw materials,” Mark Bachmann, chief financial officer at Zep Inc. (ZEP), an Atlanta-based maker of detergents, hand cleaners and lubricants, said on an April 9 conference call. “The tremendous volatility in raw material prices makes it difficult for us to pass through sufficient price increases, creating an imbalance between price and cost.”

The cost of intermediate goods rose 0.7 percent for a second month, reflecting higher chemicals. Crude prices dropped 2.5 percent.

Producer prices are one of three monthly inflation gauges reported by the Labor Department. The consumer price index, due tomorrow, rose 0.3 percent in March after gaining 0.4 percent in the prior month, according to the median estimate in the Bloomberg survey.

The cost of goods imported into the U.S. rose 1.3 percent last month, reflecting more expensive fuel and metals costs, Labor Department data showed yesterday.

To contact the reporter on this story: Alex Kowalski in Washington at akowalski13@bloomberg.net

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

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