U.S. core producer prices rose slightly faster than expected in March from February, as motor vehicle prices jumped, and the core increase from a year ago was the largest since August 2009.
The Labor Department said on Thursday its seasonally adjusted index for prices paid at the farm and factory gate -- excluding volatile food and energy costs -- rose 0.3 percent after gaining 0.2 percent in February. Economists had expected core PPI to rise 0.2 percent in March.
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Light trucks prices, which advanced 0.7 percent, accounted for a third of the rise in core PPI last month. The increase in light truck prices was the biggest since July. Passenger vehicle prices increased 0.9 percent, the largest increase since June 2009.
"It looks like the disruption to global autos production stemming from the Japanese disaster will hit autos supply and, consequently could lead to some further steep price increases over the next few months," said Paul Ashworth, chief U.S. economist at Capital economics in Toronto.
In the 12 months to March, the core producer price index rose 1.9 percent, the biggest increase since August 2009, after gaining 1.8 percent in February. March's increase was in line with market expectations.
The increase in headline PPI, however, slowed to 0.7 percent after surging 1.6 percent in February.
Economists polled by Reuters had expected PPI to rise 1 percent last month. In the 12 months to March, producer prices increased 5.8 percent, the largest gain in a year, after rising 5.6 percent in February.
Although rising gasoline prices are exerting upward pressure on inflation at the production level, the Federal Reserve largely views this as transitory. Officials have, however, said they would act if necessary to ensure that an inflation psychology does not take root.
FED WORRIES ABOUT COMMODITY PRICES
The U.S. central bank said in its Beige Book summary of economic conditions on Wednesday that businesses were reporting that higher commodity costs were putting upward pressure on prices.
But with the labor market still weak and wage growth subdued, producers have limited capacity to pass on the higher costs to consumers.
A second report from the Labor Department showed initial claims for state unemployment benefits rose 27,000 to a seasonally adjusted 412,000, well above economists' expectations for a fall to 380,000.
The four-week moving average of unemployment claims -- a better measure of underlying trends - climbed 5,500 to 395,750.
The rise in claims interrupted a downward trend that had kept them below the 400,000 threshold for four weeks. That level is normally associated with steady job growth. Despite last week's rise, the four-week average held below the 400,000 mark for a seventh straight week.
S&P index futures extended losses on the claims data, while U.S. government debt prices extended gains.
Energy prices, which rose 2.6 percent, accounted for nearly 90 percent of the increase in wholesale prices last month. Energy prices rose 3.3 percent in February.
Gasoline prices rose 5.7 percent after increasing 3.7 percent in February. Food prices fell 0.2 percent, the first decline since August.
(Reporting by Lucia Mutikani; Editing by Neil Stempleman)