Wholesale Inflation Up After Four Months of Declines

Politics Reuters

U.S. producer prices rose in March after four straight months of declines and there were signs of some firming in underlying inflation, which should keep the Federal Reserve on course to start raising interest rates this year.

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The Labor Department said on Tuesday its producer price index for final demand increased 0.2 percent last month, with rising prices for goods accounting for more than half of the jump.

The PPI had declined 0.5 percent in February as profit margins in the services sector, especially gasoline stations, were squeezed, and transportation and warehousing costs fell.

In the 12 months through March, producer prices fell 0.8 percent, the biggest year-on-year decline since the revamped series started in 2009, after sliding 0.6 percent in February.

Economists had forecast the PPI rising 0.2 percent last month and falling 0.8 percent from a year ago.

While energy prices have stabilized, a strong dollar and weak global demand are likely to keep inflation subdued for a while.

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Low inflation and signs of a sharp slowdown in economic growth in the first quarter have prompted most economists to push back their expectations for the first Fed rate hike to either September or October from June.

The Fed, which has a 2 percent inflation target, has kept its key short-term interest rate near zero since December 2008.

Energy prices, which had been a drag on producer inflation in recent months, jumped 1.5 percent in March after being unchanged in February. Wholesale food prices fell 0.8 percent, declining for a third straight month.

The volatile trade services component, which mostly reflects profit margins at retailers and wholesalers, slipped 0.2 percent last month after a record 1.5 percent decline in February.

Transportation and warehousing services fell 0.2 percent, dropping for a fourth straight month.

A key measure of underlying producer price pressures that excludes food, energy and trade services rose 0.2 percent after being unchanged in February. (Reporting by Lucia Mutikani; Editing by Paul Simao)