Wholesale Prices in U.S. Increase for First Time in Five Months

Jeep SUVs on display at a car dealership in New York City.

Jeep SUVs on display at a car dealership in New York City.

Photographer: Andrew Burton/Getty Images

Wholesale prices in the U.S. climbed in March for the first time in five months, reflecting higher costs for fuels and motor vehicles.

The 0.2 percent gain in the producer price index followed a 0.5 percent drop the prior month, a Labor Department report showed Tuesday. Over the past 12 months, wholesale costs fell 0.8 percent. The PPI excluding volatile food and fuel also increased 0.2 percent from a month earlier.

A pickup in wholesale costs that filters through to consumers would help reassure Federal Reserve policy makers that inflation will advance toward their goal. At the same time, a rising dollar and limited growth overseas may hamper efforts by American companies to be more aggressive in raising prices.

“As long as policy makers are confident about future inflation, even if today’s inflation is on the low side, they’re still able to act” and raise interest rates, Guy Lebas, chief fixed-income strategist at Janney Montgomery Scott LLC in Philadelphia, said before the report.

The median estimate in a Bloomberg survey of 74 economists called for a 0.2 percent rise. Estimates ranged from a 0.3 percent decline to a 0.5 percent gain.

Another report on Tuesday from the Commerce Department showed retail sales rose 0.9 percent in March, the first gain in four months. While the pickup in purchases was the biggest in a year, the gain was less than the 1.1 percent median projection in a Bloomberg survey.

Wholesale prices excluding food and energy were projected to rise 0.1 percent after falling 0.5 percent the month before, according to the Labor Department’s data. The core index increased 0.9 percent in the 12 months through March.

Eliminating food, energy and trade services, which some economists prefer because it strips out one of the most volatile components of PPI, costs climbed 0.2 percent last month after no change in February.

Autos, Fuel

More than half the March increase in final demand prices was due to a 0.3 percent advance in the cost of goods. Motor vehicle prices jumped 1.9 percent, the most since October 2008, while a 7.2 percent surge in the cost of gasoline was the biggest since September 2012.

The producer price gauge is one of three monthly inflation reports released by the Labor Department, which also produces the consumer price index and the import cost measure.

The Fed’s preferred inflation gauge, which is based on personal consumption expenditures, showed signs of stirring in February, suggesting improvement in the economy is giving companies the ability to raise prices.

Federal Reserve

The Federal Open Market Committee was split at its meeting last month on when to begin raising rates from near zero. Several participants wanted to normalize policy starting in June, while others favored later in the year, according to minutes of the March 17-18 gathering.

“Several participants judged that the economic data and outlook were likely to warrant beginning normalization at the June meeting,” according to the minutes. Others said energy-price declines and a stronger dollar would continue to curb inflation, arguing for a rate increase later in the year. A couple said the economy probably wouldn’t be ready for tighter policy until 2016.

In March, the FOMC dropped a pledge to be “patient” as it considered the first rate rise since 2006, while also reducing forecasts for the path of increases.

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