Wholesale prices rise 0.7%, more than expected

Wholesale prices in the U.S. rose more than forecast in March, boosted by higher costs for energy and the biggest gain in food since 1984.

The 0.7% increase in prices paid to factories, farmers and other producers followed a 0.6% drop in February, the Labor Department said Thursday. Excluding fuel and food, so-called core prices rose 0.1% for a second month, restrained by cheaper autos and appliances.

Inflation may be limited as companies rely on productivity gains to offset higher costs of energy and raw materials. Excess capacity and slow job growth underscore the Federal Reserve’s pledge to keep interest rates close to zero for an “extended period.”

“Inflation remains subdued,” said Joseph Brusuelas, president of Brusuelas Analytics in Stamford, Conn. Limited price pressure “provides an extraordinary amount of comfort to Fed policymakers. They can stay on hold well into 2011.”

Producer prices were forecast to rise 0.5% in March, according to a Bloomberg analyst survey.

The number of Americans filing first-time claims for unemployment benefits dropped by 24,000 to 456,000 in the week ended April 17, the Labor Department said in a separate report. The number of people receiving unemployment insurance and those getting extended benefits also fell.

Prices excluding food and fuel were estimated to rise 0.1% for a second month.

The cost of food jumped 2.4% in March, the most since January 1984. Vegetable prices rose by the most since December 1994, and the cost of fish posted the biggest gain since April 2006.

Energy costs increased 0.7% last month. Gasoline prices rose 2.1%, and costs for heating oil and residential electricity were also higher.

Companies paid 6% more for goods in the 12 months ended in March, the biggest year-over-year gain since September 2008, after rising 4.4% the previous month. The March gain matched the median forecast.

Excluding food and energy, wholesale prices increased 0.9% in the 12 months ended in March, after a 1% gain.

Rising energy costs may keep year-over-year comparisons elevated. Crude oil on the New York Mercantile Exchange averaged $81.29 a barrel last month. In March 2009 it averaged $48.06.