WASHINGTON - Surging energy and food costs stoked US wholesale prices by a much larger-than-expected 1.1 percent in March amid mounting concerns about accelerating inflation, a government report showed Tuesday.
The Labor Department's monthly Producer Price Index (PPI), which tracks wholesale inflation pressures before they are passed on to consumers, showed prices rising at a much faster pace than most economists had anticipated.
The spike in the PPI was the largest since November and occurred as world oil prices have rocketed to record peaks in recent weeks.
The core PPI reading, which strips out volatile food and energy costs, rose a much tamer 0.2 percent last month, the government survey revealed.
Economists had expected wholesale costs to increase 0.6 percent in March, so the actual gain was almost double what most analysts had predicted. The increase in the core PPI reading was in line with most forecasts.
The inflation snapshot was released as concern mounts about sharp spikes in global commodity prices which have pushed food costs higher.
World Bank president Robert Zoellick warned over the weekend that a doubling of food prices in the past three years could cause increased poverty and political problems.
US economists say the Federal Reserve has been more focused on fighting an economic slowdown and averting a possible recession than tempering inflationary pressures. The Fed has aggressively slashed interest rates in recent months in a bid to fire up economic momentum.
"For now the Fed is operating under the assumption that the slowing economy and excess slack will ease price pressures at the core level. Energy and commodity prices are also expected to level off, although there is a high degree of uncertainty to this assumption," economists at Societe Generale said in a briefing note.
Rocketing energy and food costs lifted producer prices higher last month.
Energy prices surged 2.9 percent in March, marking a notable acceleration compared with a 0.8 percent rise in energy costs in February.
Energy costs were propelled higher in part by rising diesel and heating oil costs which rose 15.3 percent and 13.1 percent respectively.
The inflation survey was released as world oil prices rocketed to new record peaks Tuesday, as a key oil futures contract traded in New York briefly struck an all-time high of 113.66 dollars a barrel.
Economists say rising energy costs have impacted wholesale food prices as farmers pay more to fuel their tractors and transport their products to market.
Food prices leapt 1.2 percent during March after increasing 0.5 percent in February.
Prices for a range of foods have increased in recent months, including such staples as wheat, rice and milk.
The core PPI rate was weighed down in part by a 0.2 percent decline in passenger car prices. Analysts said auto manufacturers have been forced to discount prices in a bid to woo consumers reeling from the housing downturn and a related credit crunch.
Headline PPI inflation in the year to March was up 6.9 percent while the core rate was 2.7 percent higher.
cg-jjc/mac
04/15/2008 14:19 GMT