WASHINGTON – A big jump in food prices helped push U.S. wholesale prices sharply higher last month, the government said on Thursday in a report likely to sustain budding inflation worries.
Excluding at-times volatile food and energy costs, the so-called core PPI advanced a milder 0.2 percent.
Wall Street economists had expected a 0.3 percent rise in overall producer prices, with core prices up a mild 0.1 percent.
Food prices soared 1.5 percent, the biggest increase since October, as vegetable prices shot higher and beef prices turned up after a decline.
The department said the steep rise in food prices accounted for over half of the acceleration in producer prices last month, which picked up from a tame 0.1 percent rise in February.
Energy prices increased a hefty 0.6 percent in March, building on a string of recent sharp rises. The cost of home heating oil gained 11 percent and gasoline prices rose 1.3 percent. In contrast, the cost of residential natural gas slipped 0.5 percent.
Prices for small trucks and SUVs, which had plunged in February, rose 0.8 percent last month, helping fuel the rise in the core index.
Core wholesale prices (search) have accelerated in the first quarter, rising at a 2.1 percent annual rate compared with last year's mild 1 percent advance.
The picture further back in the production pipeline shows even more price pressures, which has led some economists to fret over the potential for retail inflation.
Both intermediate and crude goods prices rose 0.7 percent last month, with core intermediate costs up 0.6 percent and core crude goods prices up 2.7 percent.
In the first quarter, intermediate goods prices rose at a sharp 10.1 percent rate, compared with only a 3.9 percent climb last year, while crude prices have shot up at a 26.3 percent annual pace.
A big jump in consumer prices in March, along with strong job growth and retail sales, has fueled speculation the Federal Reserve (search) will raise interest rates as early as this summer to head off a rising risk of inflation.
The Fed has held overnight borrowing costs at a 1958 low of 1 percent since last June in an effort to wipe out any risk consumer prices could begin tumbling amid a weak economy.
Fed Chairman Alan Greenspan said on Tuesday U.S. companies were regaining the power to raise prices and that a long period of worry about deflation was over — remarks that helped cement expectations rates would soon head higher.
In a second appearance on Wednesday, Greenspan said that while rates would need to rise "at some point," broad-based inflation pressures did not seem to be building, even though prices at early stages of production had mounted.