Wholesale Prices in U.S. Rose in February on Fuel Costs

Wholesale prices in the U.S. climbed in February for a second month, reflecting a jump in energy costs that are now dissipating.

The 0.7 percent increase in the producer price index matched the median estimate in a Bloomberg survey of 72 economists and followed a 0.2 percent advance the prior month, Labor Department figures showed today in Washington. Excluding volatile food and energy, the so-called core measure rose 0.2 percent, the same as in January.

The pickup in wholesale costs is unlikely to be sustained as weak global markets in places such as Europe restrain demand for commodities. Attempts by companies such as Illinois Tool Works Inc. to find cheaper ways to purchase raw materials also will limit pressures within the production pipeline, helping keep inflation in check as the Federal Reserve has projected.

“The increase is largely because of the big jump in gasoline prices, which have moved back,” Sal Guatieri, a senior economist at BMO Capital Markets in Toronto, said before the report. Excluding energy expenses, “inflation, for the most part, remains contained. The Fed will look beyond the headline number.”

Economists’ estimates for producer prices ranged from gains of 0.2 percent to 1.5 percent. Core wholesale prices were projected to rise 0.1 percent, the Bloomberg survey showed.

The number of Americans filing applications for unemployment benefits unexpectedly dropped last week to the lowest level in almost two months, adding to signs the labor market in strengthening, other data from the Labor Department showed today.

Fewer Claims

First-time jobless claims fell by 10,000 to 332,000 in the week ended March 9, the fewest since mid January. The median forecast of 49 economists surveyed by Bloomberg called for an increase to 350,000. The four-week average declined to a five-year low.

Stock-index futures held gains after the claims figures. The contract on the Standard & Poor’s 500 Index expiring in June rose 0.3 percent to 1,554.4 at 8:33 a.m. in New York.

The PPI report showed that compared with the same month a year earlier, companies paid 1.7 percent more for goods, after a 1.4 percent year-to-year rise in January. The core index also increased 1.7 percent in the 12 months ended in February, the smallest advance since January 2011.

Energy Costs

The increase in the PPI was led by a 3 percent advance in energy costs, the first gain in five months. Heating oil prices climbed 9.7 percent, the most since October 2010, and gasoline was up 7.2 percent.

The cost of finished consumer foods dropped 0.5 percent, led by cheaper fresh and dry vegetables.

Expenses for intermediate goods increased 1.3 percent, and those for crude goods dropped 0.3 percent.

Oil prices have shown large swings this year. Brent crude traded on the ICE Futures Europe exchange in London at an average of $112.32 a barrel in January, jumped to $116.07 a barrel in February, and has since fallen to around $108 a barrel as of yesterday.

Gasoline costs, which surged to a four-month high on Feb. 26, were down about 9 cents to $3.71 a gallon as of March 12, according to AAA, the nation’s biggest motoring group.

Raw Materials

Illinois Tool Works, a manufacturer of steel, plastic and paper packaging used in transporting goods, said it is improving the process of purchasing raw materials to reduce costs.

“This will mean effectively lower raw material prices in one shape or form,” David Parry, vice chairman, said during a conference presentation on March 5.

Whirlpool Corp., the world’s largest appliance maker, also is trying to boost efficiency to hold down expenses, and projects input costs will slow this year from 2012.

Raw materials prices “are still increasing, but at a lower rate, and we expect to absorb all of that through other productivity activities,” Jeff Fettig, chief executive officer, told investors and analysts at a conference yesterday.

Limited price pressures give Fed officials room to maintain record stimulus to spur growth and trim the unemployment rate.

Inflationary pressures were “modest,” the central bank said in its Beige Book report released March 6. “Most district contacts did not plan to increase prices.”

Producer prices are one of three monthly inflation gauges reported by the Labor Department. Import prices climbed in February by the most in six months, led by increases in energy. The cost of living index, the broadest of the three measures, will be released tomorrow.