Wholesale Prices Post Modest February
Mar 15 9:13am ET
By Mark Egan
WASHINGTON (Reuters) - U.S. wholesale prices nudged higher in February, driven by rising gasoline prices, the government said on Friday in a report that showed little evidence of inflation pressures building in the economy.
The Labor Department said producer prices rose 0.2 percent in February after a 0.1 percent gain in the previous month.
The February price gain was larger than the 0.1 percent forecast by economists in a Reuters poll. However, it should be low enough to reassure the Federal Reserve, when it meets to set interest rate policy next week, that inflation will not be rearing its ugly head anytime soon.
Excluding volatile food and energy components, wholesale prices were unchanged in February after declining 0.1 percent in January. Economists had expected prices excluding food and energy to advance 0.1 percent during February.
"These numbers suggest that the Fed won't have to raise interest rates soon, even though the economy is picking up," said Gary Thayer, chief economist at A.G. Edwards & Co.
Inflation-sensitive Treasury bond markets shrugged off the PPI report, with the market looking to data on U.S. industrial output and consumer sentiment, due later on Friday, for pointers on the strength of the U.S. economy.
The modest overall gain in producer prices for February was driven by a 0.4 percent increase in finished energy prices, a category that includes items like gasoline where prices advanced 4.5 percent during the latest month.
But highlighting just how muted inflation pressures are in the world's richest economy, the latest data still left prices 2.6 percent lower over the past year -- a rate of price declines not seen in over 50 years since President Harry S. Truman was in the White House.
"It does suggest that the Fed has a lot more time before it needs to begin raising rates," said Scott Brown, chief economist at Raymond James and Associates.
The Fed is expected to leave interest rates unchanged at its crucial Federal Open Market Committee (FOMC) meeting on Tuesday. However, many analysts believe the central bank could shift is policy stance from the current one, in which the economy is at risk of further weakness, to one in which the risks of inflation and weakness are balanced.
Such a shift by the Fed would help edge the door open for interest rate increases later in the year. The powerful central bank cut interest rates 11 times last year to help boost the ailing economy. But it will want to make sure the economy is fully on the road to recovery before reversing any of that monetary easing.
The latest report showed prices of finished consumer foods rose 1 percent in the latest month, but elsewhere there were few signs of rising prices. Prices of passenger cars fell 0.2 percent in February.
Prices of intermediate goods, items like plastic and lumber used to make finished products, fell 0.1 percent in February while crude prices of items like wheat and petroleum fell 0.8 percent in the latest month -- suggesting producer prices should remain subdued in the months ahead. |
