Producer Prices Up 0.2%

U.S. producer prices excluding energy and food rose faster than expected last month and high gasoline prices boosted otherwise tepid retail sales, the government said Tuesday in reports that signal inflationary pressures.

U.S. producer prices rose 0.2% last month as food costs fell, but prices outside of food and energy were up a steeper-than-expected 0.3%.

Retail sales in May climbed 0.1%, matching Wall Street expectations, with declines in sales of autos, furniture and building materials.

Analysts said the increase in core producer prices accentuated the risk that rising prices might be working their way from producers to consumers.

“Pipeline inflation pressures continue to build, and that impression was not dispelled by today’s release,” said William O’Donnell, head of U.S. interest rate strategy and research at UBS in Stamford, Conn.

The consumer price report for May is to be released today, providing a much broader outlook on inflationary pressures. Analysts expect a 0.4% rise in the CPI, while the core rate is expected to increase 0.2%.

Despite the stiffer-than-expected monthly increase in producer prices outside of food and energy, the 12-month gain held steady at the 1.5% increase seen in April, which could help temper inflation concerns.

Energy costs climbed 0.4% in May, a much slower pace of advance than in March or April, when they advanced 1.8% and 4%, respectively.

Residential natural gas prices slid 3.1%, their fourth straight monthly decline. The drop helped offset a 2.2% gain in gasoline prices, a 5.1% jump in the cost of liquefied petroleum gas and a 2.6% increase in home heating oil.

Food costs fell 0.5%, helping to restrain the advance in overall producer prices.

In a separate report, the Commerce Department said sales at U.S. retail stores rose 0.1% in May, as expected, as strong gasoline sales outweighed declines in some other categories.

Sales at gasoline stations climbed 1.9%, following an upwardly revised 5.5% rise in April, as higher energy prices inflated prices at the pump.

When gasoline sales were stripped from the retail sales number, they were down 0.1%.

Sales at gas stations were up 22% from May 2005.

Meanwhile, motor vehicle and parts sales fell 1.6%, the largest drop since February.

Excluding cars and parts, retail sales rose 0.5%, in line with expectations.

When cars, parts, and gas were excluded, retail sales advanced 0.3%.

Furniture and home-furnishing store sales fell 0.5% but were up 7.4% from a year earlier. Sales at building-materials and garden-equipment stores fell 0.4% but were up 11.2% from May 2005.

Consumer spending accounts for two-thirds of U.S. economic activity and analysts worry that higher energy prices, which act like a tax on households, are hitting consumption.

A separate Commerce Department report showed U.S. business inventories rose a smaller-than-expected 0.4% in April, tempered by a drop in the stocks of total retail trade and motor vehicles and parts.