Producer Prices Up in February
Big gains in food and energy costs pushed U.S. producer prices up sharply last month, but slumping vehicle prices kept a gauge of underlying costs largely in check, a government report showed Tuesday.
The Labor Department said the producer price index, a measure of prices charged by farms, factories and refineries, rose 0.4% in February as energy prices shot up 1.4% and food costs advanced 0.8%.
But the core producer price index, which excludes volatile food and energy costs, rose just 0.1%, matching Wall Street forecasts and soothing inflation fears spurred by a hefty gain of 0.8% in January.
Still, core producer prices are up 2.8% over the last 12 months, the biggest gain since a matching increase in November 1995. Overall producer prices have risen 4.7% on a big run-up in the cost of oil.
“The wholesale price data continue to show evidence of a significant pickup in underlying inflation pressures,” economists at Morgan Stanley wrote in a note to clients.
The Federal Reserve noted mounting price pressures as it voted Tuesday to push benchmark overnight interest rates up a quarter of a percentage point to 2.75%.
“Pressures on inflation have picked up in recent months and pricing power is more evident,” the Fed said in a statement announcing its rate action.
The 1.4% increase in energy costs was led by a 5.2% increase in the price of gasoline. In addition, home heating oil rose 3.8% and the price of liquefied petroleum gas increased 3.2%.
Car prices slid 0.9% in February and prices for light trucks and SUVs plunged 2.8%. Those drops marked a reversal from January -- when vehicle prices rose sharply -- and kept the core producer price gauge in check.
Stripping out vehicle costs, overall producer prices would have gained 0.7%, with the core rate up a steep 0.4%.
Two other factors, cigarettes and alcohol, that helped fuel January’s big core PPI jump marched still higher last month, but not quite as swiftly.
Some analysts took note of rising costs for industrial machinery and said that suggested that strong economic growth was exerting pressure on prices.
The report presented a mixed view of inflation pressure further back in the production pipeline. Costs at the intermediate stage of production rose 0.7% overall and 0.5% with food and energy stripped out.
However, prices for crude goods, or goods for further processing such as corn and cattle for slaughter, dropped 1.6%, with core crude goods costs down 3%. It was the third consecutive month that prices at the crude goods level had declined.
