US producer prices likely rose in March for 1st time in 5 months as gas prices level off

EnergyAssociated Press

The Labor Department reports on U.S. producer prices in March at 8:30 a.m. Eastern on Tuesday.

SMALL INCREASE: Economists forecast that the producer price index ticked up 0.1 percent in March, according to a survey by data provider FactSet. That would be the first increase in five months. The index measures the prices of goods and services before they reach the consumer.

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Lower prices at the gas pump have sent producer prices sharply lower. They have fallen 0.6 percent in the past 12 months. Excluding the volatile food and energy categories, core producer prices have increased just 1 percent.

INFLATION REAPPEARS: Slightly higher gas prices, and higher profit margins for wholesalers and retailers, are expected to have pushed up producer prices in March.

Federal Reserve officials are closely watching measures of inflation as they consider when they will raise the short-term interest rate they control. That rate has pinned at zero for more than six years.

Many economists predict the Fed won't move until September or later, partly because they want to become more confident that inflation will reach their target of 2 percent.

The Fed aims for 2 percent inflation to guard against deflation, which can cause a destabilizing drop in prices and wages.

Yet the Fed's preferred measure of inflation has been stuck below 2 percent for nearly three years. Another factor holding down prices has been the strong U.S. dollar, which makes imported goods cheaper.

Some Fed officials pointed to the low inflation readings in their March meeting and argued for delaying the first rate increase until later this year, according to minutes of the meeting, which were released last week. Other officials supported making the first move in June.

After that meeting, the Fed said in a statement that it wanted to see more improvement in the job market and to be "reasonably confident" that inflation would move toward its 2 percent goal before raising rates.