Your Economy (No Politics)

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U.S. March PPI up 0.5%, core PPI up 0.1%
Tuesday, April 18, 2006 1:50:45 PM
http://www.afxpress.com


WASHINGTON (AFX) -- U.S. producer prices rose 0.5% in March as gasoline prices showed their largest gain in 17 months, the Labor Department said Tuesday

Outside of food and energy, however, seasonally adjusted finished goods prices showed little movement. The core producer price index increased 0.1% in March, the smallest gain since November and a hopeful sign that higher energy prices have not led to a more generalized inflation

Economists surveyed by MarketWatch had been expecting for last month's PPI to rise 0.4% and for the core to rise 0.2%. In February, the PPI fell 1.4% on tumbling energy prices, but the core PPI rose 0.3%. The PPI is up 3.5% in the past year, the lowest year-over-year gain since September 2004. Core prices are up 1.7% in the past year, the same year-over-year gain as last month. In the first quarter, the PPI fell at a 2.5% annual rate, while core prices rose at a 3.1% pace

The Federal Reserve will get a better picture of inflationary trends on Wednesday, when the Labor Department reports on the consumer price index for March. Economists expect a 0.4% gain in the headline inflation rate, with a more moderate 0.2% gain in the core CPI

The tame 0.1% gain in the core "came as a big relief to markets that had been jittery after two previous above-trend increases," said Joshua Shapiro, chief economist for MFR. "We do not expect to see much, if any, sustained pressure emerge from the core PPI." Fed policymakers are expected to raise interest rates at least one more time in early May to put the overnight federal funds rate at 5%. Further rate increases will depend on what economic data show. Most Fed officials have said they expect core inflation to remain restrained but vow vigilance against any outbreak higher

IN a separate report, the Commerce Department said housing starts fell another 8% in March to a seasonally adjusted annual rate of 1.96 million, the lowest in a year. In the March PPI, the inflation picture was serene further back in the production pipeline, but the data were collected before a recent spike in commodity prices that will likely boost crude goods prices in April

In March, intermediate goods prices fell 0.1%, while core intermediate goods prices rose 0.1%. In the past 12 months, core intermediate goods prices -- a key inflation gauge used by Fed policymakers -- have risen 4.4%, down from 4.8% last month

Crude goods prices fell 2.7%, the fifth straight decline. At the finished goods level, energy prices rose 1.8%, including a 9.1% increase in gasoline prices. Other consumer energy goods prices fell: Natural gas was down 0.5%, electricity sank 0.7% and heating oil dropped 3.6%

Finished consumer foods prices rose 0.5%, as egg prices soared 29% and seafood prices rose 11.5%

Finished consumer goods excluding food and energy rose 0.2%. Car prices rose 0.4%. Capital goods prices increased 0.1%

At the intermediate processing level, energy goods prices fell 0.9% as natural-gas prices sank. At the crude goods level, energy prices dropped 4.5%. Foods and feedstuffs prices fell 2.2%. Basic industrial materials prices rose 0.8%. Iron and steel scrap prices increased 1.5%

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