Bloomberg: Producer Prices in U.S. Increase More Than (Double!) Forecast

[El Pinko]

http://www.bloomberg.com/apps/news?pid=20601087&sid=aAQtmKIWuUl0&refer=home


Producer Prices in U.S. Increase More Than Forecast
By Bob Willis


Feb. 26 (Bloomberg) -- Prices paid to U.S. producers rose more than twice as much as forecast in January, pushed up by higher fuel, food and drug costs, signaling inflation may keep accelerating even as growth slows. The 1 percent increase followed a 0.3 percent drop in December, the Labor Department said in Washington. The median forecast in a Bloomberg News survey of economists was for a 0.4 percent gain. Excluding food and energy, so-called core wholesale prices climbed 0.4 percent, the most in almost a year.

Combined with figures showing consumer prices also rose more than forecast, today's report may prompt the Federal Reserve to consider raising interest rates as soon as the economy stabilizes. Fed officials, including Governor Frederic Mishkin yesterday, have warned that higher prices may stoke inflation expectations.

``What you've got is a lot of inflationary pressures building,'' said Roger Kubarych, chief U.S. economist at Unicredit Global Research in New York, who correctly forecast the rise in core prices. For now, ``the Fed will put them in second position in terms of priority until this financial strife settles down,'' he said.

As consumer and wholesale prices climb, home values continue to slump. House prices in 20 U.S. metropolitan areas fell in December by 9.1 percent from a year before, the most in the 20-year history of the S&P/Case-Shiller index, a private report showed today.