Producer prices up on surging gasoline, core rate flat

WASHINGTON, Fri Oct 12, 2012 – Producer prices rose more than expected in September as the cost of energy surged, a government report showed on Friday, but underlying inflation pressures were muted.

The Labor Department said its seasonally adjusted Producer Price Index increased 1.1 percent last month.

Economists polled by Reuters had expected prices at farms, factories and refineries to rise 0.7 percent last month.

Despite the rise in overall wholesale inflation last month, there is likely to be little pass-through to consumers given sluggish job growth, which puts a brake on inflation.

Wholesale prices excluding volatile food and energy were flat last month. That was the lowest reading since October 2011 and fell short of analysts’ forecasts.

Consumer inflation is currently below the Federal Reserve’s 2 percent target, and many economists think it will trend below that level for years to come.

In a bid to boost economic activity, the Fed launched an aggressive new stimulus program last month, pledging to buy $40 billion of mortgage-backed debt a month until the outlook for jobs improves substantially.

December producer prices fall 0.1 percent, DOL report says

WASHINGTON ― Producer prices fell in December as companies paid less for gasoline and vegetables, although higher prices for light motor trucks pushed a measure of underlying inflation higher.

The Labor Department said on Wednesday its seasonally adjusted index for prices received by farms, factories and refineries fell 0.1 percent.

Economists polled by Reuters had expected wholesale prices to increase 0.1 percent.

Excluding volatile food and energy, core producer prices rose 0.3 percent last month, the biggest rise since July. That was above economists’ expectations for a 0.1 percent gain.

The data appears to send mixed messages about inflation pressures in the U.S. economy.

A drop in energy prices has encouraged Wall Street and the U.S. Federal Reserve to forecast inflation will cool in coming months. Energy costs for businesses fell 0.8 percent last month, with gasoline down 2.3 percent. Food prices fell 0.8 percent.

At the same time, higher core prices – if eventually passed on to consumers by businesses – might make the U.S. central bank more cautious about taking additional steps to help the still-struggling U.S. economy.

That said, about 30 percent of the gain in core prices were due to an increase in prices for light motor trucks, the Labor Department said.

Prices in auto sector have been affected in recent months by floods in Thailand that last year disrupted supply chains. Prices for light trucks rose 0.9 percent last month, the biggest rise since July.