U.S. Producer Prices Rise More Than Expected On Rebound In Service Prices

(RTTNews) - With prices for services showing a notable rebound, the Labor Department released a report on Friday showing that U.S. producer prices rose by much more than expected in the month of March.

The Labor Department said its producer price index for final demand advanced by 0.5 percent in March after edging down by 0.1 percent in February. Economists had been expecting the index to tick up by 0.1 percent.

The bigger than expected increase by the index was largely due to a rebound by the new services component, which rose by 0.7 percent in March after falling by 0.3 percent in February.

A 3.3 percent jump in margins for apparel, jewelry, footwear, and accessories retailing led the advance in prices for final demand services.

The report also showed that food prices surged up by 1.1 percent in March following a 0.6 percent increase in the previous month.

However, the jump in food prices was offset by a drop in energy prices, which fell by 1.2 percent in March after rising by 0.5 percent in February.

Prices for final demand goods were subsequently unchanged in March after rising by 0.4 percent in each of the three previous months.

Reflecting the rebound in service prices, core producer prices, which exclude food and energy, rose by 0.6 percent in March following a 0.2 percent drop in the previous month. Core prices had been expected to rise by 0.2 percent.

"Bottom line, while some Fed members are having a difficult time finding any sort of inflation, data this week point to the existence of some of it," said Peter Boockvar, managing director at the Lindsey Group. "The inflation stats I believe have bottomed and are about to turn higher."

Compared to the same month a year ago, producer prices rose by 1.4 percent in March, reflecting a notable acceleration from the 0.9 percent growth seen in February.

Core producer prices also increased at an annual rate of 1.4 percent in March compared to the 1.1 percent increase in February.

The producer price data was recently overhauled to include services and construction as well as goods to encompass a greater portion of the economy.

Next Tuesday, the Labor Department is scheduled to release a separate report on consumer price inflation in the month of March.