Wholesale costs in the U.S. rose more than forecast in February, led by food prices at a more than three-decade high and a surge in energy.
The producer-price index climbed 1.6 percent from the prior month, the most since June 2009, Labor Department figures showed today in Washington. The median projection in a Bloomberg News survey was for a 0.7 percent gain. The so-called core measure, which excludes volatile food and energy costs increased 0.2 percent, matching forecasts.
The cost of raw materials has risen further as expanding economies in Asia and Latin America lift demand, and crude oil has been pushed up by turmoil in the Middle East. Even so, firms have limited scope to raise prices to shield profits, allowing the Federal Reserve yesterday to maintain monetary easing to spur growth while citing “subdued” underlying inflation.
“Companies hardly have pricing power,” Stephen Gallagher, chief U.S. economist at Societe Generale SA in New York, said before the report. “Underlying inflation is contained.”
Estimates for producer prices were based on forecasts from 72 economists in a Bloomberg News survey. Projections ranged from a drop of 0.1 percent to a gain of 1.1 percent, after a 0.8 percent rise in January.
Wholesale prices excluding volatile food and energy costs were projected to rise 0.2 percent from the prior month, the survey showed. The core index rose 0.5 percent in January.
Compared with a year earlier, companies paid 5.6 percent more for goods last month after a 3.6 percent rise in January.
Core wholesale prices climbed 1.8 percent in the 12 months ended in February, in line with the median forecast in the Bloomberg survey and following a 1.6 percent year-over-year gain the prior month.
The cost of food increased 3.9 percent, the most since November 1974, while energy prices rose 3.3 percent led by a 15 percent jump in home heating oil.
Expenses for intermediate goods rose 2.0 percent from the prior month, the biggest gain since July 2008.
Prices of crude goods increased 3.4 percent.
El Segundo, California-based Mattel Inc. is among companies that plan to try to raise prices to cushion their profits. The world’s largest toymaker said the increases would be across all its brands.
“Costs are going up,” Robert Eckert, Mattel’s chief executive officer, said on a Feb. 2 teleconference. “We will be raising prices,” and “it’s most likely high single-digits in terms of price increases essentially across the whole line this year.”
Oil futures on the New York Mercantile Exchange have increased 22 percent from a year ago. Commodities, which completed a sixth monthly gain in February, are retreating as Japan grapples with the aftermath of its worst earthquake on record and the ensuing tsunami.
The Fed is trying to speed up the world’s largest economy through a second round of bond purchases that’ll pump $600 billion into the financial system by June. Along with the so-called quantitative easing, the central bank indicated its commitment to keeping the benchmark interest rate near zero for an “extended period.”
Recent increases in oil and other commodity expenses “are currently putting upward pressure on inflation,” Fed officials said yesterday in a statement after their meeting. “The Committee expects these effects to be transitory, but it will pay close attention to the evolution of inflation and inflation expectations.”
The central bank’s preferred price gauge, which excludes food and fuel, rose 0.8 percent in January from a year earlier, matching December’s year-over-year gain, the smallest in five decades of record-keeping. Fed officials aim for long-run overall inflation of 1.6 percent to 2 percent.
Producer prices are one of three monthly inflation gauges reported by the Labor Department. Prices of goods imported into the U.S. climbed 1.4 percent in February from the prior month, more than the median forecast in the Bloomberg survey and led by commodity costs, data showed yesterday.
Consumer prices, the broadest of the three measures, rose 0.4 percent in February for a third month, and the core index had a smaller gain compared with January, according to the Bloomberg survey. The figures are due tomorrow.