Wholesale Prices in U.S. Rise Most in Three Years on Oil

Wholesale prices in the U.S. increased in August by the most in more than three years, reflecting a surge in energy costs.

The producer price index climbed 1.7 percent after an increase of 0.3 percent in July, the Labor Department reported today in Washington. The median estimate in a Bloomberg survey of 79 economists called for a 1.2 percent gain. Core wholesale inflation, which excludes volatile food and energy prices, rose 0.2 percent, in line with forecasts.

Companies may find it difficult to pass on higher energy costs as the global economic slowdown and so-called fiscal cliff of higher taxes and government spending cuts prompt their customers to limit spending. The absence of broad-based price increases gives Federal Reserve policy makers, who meet today, room to provide more monetary stimulus for the economy.

“Outside of energy, producer prices for the most part are pretty contained,” said Omair Sharif, a U.S. economist at RBS Securities Inc. in Stamford, Connecticut. “I don’t think the Fed is going to be too concerned. The Fed is going to take today’s report as consistent with their view that the run-up in energy is transitory.”

The gain in producer prices was the biggest since June 2009 and reflected the biggest jump in energy costs in three years.

Another Labor Department report showed the number of Americans filing applications for unemployment benefits rose more than projected last week. Jobless claims increased 15,000 in the week ended Sept. 8, the biggest gain in almost two months, to 382,000.

Stock Futures

Stock-index futures held earlier losses as investors awaited the Fed’s statement on monetary policy. The contract on the Standard & Poor’s 500 Index expiring this month fell 0.2 percent to 1,437 at 8:53 a.m. in New York.

Economists’ estimates for producer prices ranged from increases of 0.1 percent to 2 percent. Core wholesale prices were projected to climb 0.2 percent, the Bloomberg survey showed.

Compared with a year ago, companies paid 2 percent more for goods, after a 0.5 percent gain in the 12 months ended in July. The core index increased 2.5 percent in the year ended in August, matching the rise a month earlier.

Fuel costs surged 6.4 percent from the prior month after five straight declines. Gasoline prices advanced 13.6 percent, while home heating oil costs increased 10.8 percent, the most since October 2010.

Food Prices

The cost of finished foods rose 0.9 percent, the biggest gain since November and reflecting higher prices for eggs, vegetables and dairy products.

Prices of passenger cars decreased 0.2 percent, while costs declined for furniture, computers and footwear.

Expenses for intermediate goods increased 1.1 percent, and those for crude goods jumped 5.8 percent. Intermediate, or semi- finished, goods excluding energy and food decreased 0.2 percent in August, the fourth straight decline.

The producer price index is one of several inflation measures monitored by the Fed. The consumer price index, due tomorrow, is projected to increase 0.6 percent, according to the median estimate in a Bloomberg survey of economists.

The Fed may announce today a third round of bond purchases, according to almost two-thirds of economists in a Bloomberg survey, while also extending the duration of its zero-interest- rate policy into 2015.

Fed Meeting

More quantitative easing intended to boost the expansion could prompt inflation pressures. Fed officials in June forecast that by late 2014 the jobless rate would still be above their full-employment estimate of 5.2 percent to 6 percent, with inflation not rising above their goal of 2 percent.

At the same time, the worst U.S. drought in 50 years that pushed up grain prices will drive up some input costs.

“We have started to hear from some of the big vendors about price increases -- we do believe they are real,” Robert Moran, chairman and chief executive officer of Phoenix-based pet product supplier PetSmart Inc. (PETM), said at a Sept. 6 conference. “They are not driven by speculative markets, they are driven by the droughts and increased commodity prices that are probably here to stay for a while.”

To contact the reporters on this story: Michelle Jamrisko in Washington at mjamrisko@bloomberg.net; Shobhana Chandra in Washington at schandra1@bloomberg.net

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

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