U.S. Producer Prices Climbed More Than Forecast in February

A worker checks his work after applying red powder coat paint to round baler components at a factory in New Holland, Pennsylvania.

Photographer: Luke Sharrett/Bloomberg

U.S. producer prices rose more than forecast in February, while costs increased from a year earlier by the most since March 2012, signaling inflation is picking up, a Labor Department report showed Tuesday in Washington.

Key Points

  • Producer-price index climbed 0.3 percent from January (forecast was for 0.1 percent gain) after 0.6 percent jump that was the biggest since September 2012
  • Over 80 percent of the advance due to 0.4 percent increase in services prices
  • PPI increased 2.2 percent from February 2016 (estimate was 1.9 percent) following a 1.6 percent rise in the previous 12-month period
  • Excluding food and energy, wholesale prices rose 0.3 percent from the previous month (forecast was 0.2 percent) and rose 1.5 percent from February 2016

Big Picture

Increased global demand is helping drive up costs of some commodities and allowing price pressures to gradually build in the production pipeline. Higher wholesale costs can lead broader inflation toward the Federal Reserve’s goal depending on how successful producers are in eventually pushing their costs through to American consumers. Fed policy makers, meeting Tuesday and Wednesday, are projected to raise interest rates as inflation moves higher and the job market continues to improve.

The Details

  • Energy prices rose 0.6 percent from the prior month; food costs increased 0.3 percent
  • PPI goods prices advanced 0.3 percent, the sixth straight rise and led by energy, after a 1 percent jump
  • Almost 70 percent of rise in goods prices attributable to electric power, which jumped 1.6 percent
  • Excluding volatile components such as food, energy and trade services, producer costs picked up 0.3 percent from previous month (forecast was 0.2 percent) and 1.8 percent from a year earlier
  • Gain in services costs was largest since June of last year and led by a 4.3 percent increase in traveler accommodation services
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