PPI Shows Moderate Gain in March

Wholesale prices rose moderately in March despite a jump in energy costs, adding to signs inflation is well- behaved amid robust economic expansion, government figures showed Friday.

The producer price index rose 0.2% in March after a 0.4% drop in February, the Labor Department said. The core PPI, which omits volatile food and energy costs, was unchanged for the second month in a row.

“What this is telling us is that excluding the run-up in energy prices, inflation continues to be a nonissue,” said Cheryl Katz, economist at Merrill Lynch & Co. in New York. She noted that even though the U.S. economy is strong, world demand has been weak, putting pressure on factories to keep down prices. “Given low levels of capacity utilization and intense global competition, pricing power remains minimal.”

Some rise in the PPI, which measures prices paid to U.S. factories, farms and refineries, was expected in light of sharp gains in oil prices brought about by last month’s deal by the Organization of Petroleum Exporting Countries, or OPEC.

OPEC, in cooperation with some major non-OPEC petroleum exporters, agreed to slash production in a bid to lift oil prices out of one of the worst slumps on record.

The March reading on the overall PPI was slightly below the 0.3% increase expected by U.S. economists in a Reuters survey, but the flat core PPI matched expectations.

In the year ended in March, wholesale prices were up a mere 0.8%.

Economists said the PPI may offer Federal Reserve policymakers further reassurance that there is no need to raise interest rates to rein in the brisk pace of economic growth.

The PPI showed a 1.2% gain for all energy goods in March. Gasoline prices increased 3.6%, while heating oil costs rocketed 13.1%.