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Producer prices rise in March

Core U.S. producer prices climb slightly faster than expected in March. Also, initial claims for jobless benefits grow unexpectedly.

April 14, 2011|Reuters

Prices paid by U.S. factories increased in March as fuel prices surged and the disruption caused by Japan's earthquake and tsunami began to be felt in the auto industry.

Another report Thursday showed a surprise jump in U.S. jobless claims that raised some questions among investors about the strength of the labor market recovery, though economists said the number could be a one-off.

Core U.S. producer prices rose slightly faster than expected in March from February and the increase from a year earlier was the largest since August 2009.

The Labor Department said its seasonally adjusted index for prices paid at the farm and factory gate — excluding volatile food and energy costs — rose 0.3% after gaining 0.2% in February.

A combination of concerns about higher inflation in the global economy and the unexpected rise in new claims for unemployment benefits helped push down U.S. stock prices. Light-truck prices advanced 0.7%, the biggest rise since July. The boost accounted for a third of the gain in the core PPI. Passenger vehicle prices increased 0.9%, the largest increase since June 2009.

"It looks like the disruption to global autos production stemming from the Japanese disaster will hit autos supply and, consequently could lead to some further steep price increases over the next few months," said Paul Ashworth, chief U.S. economist at Capital Economics in Toronto.

The core producer price index rose 1.9% in March from a year earlier, the biggest increase since August 2009 and up from February's 1.8% rise. Producer prices last month rose a seasonally adjusted 0.7%, down from a 1.6% increase in February and below the 1.0% expected by economists.

Gasoline prices jumped 31.2% in March compared with a year earlier, a reflection of concerns over the global economic recovery and unrest in the Middle East and North Africa.

A second report from the Labor Department showed initial claims for state unemployment benefits rose 27,000 to a seasonally adjusted 412,000, well above economists' expectations for a decline to 380,000.

"Given the underlying downward trend we are inclined to see it as a one-time fluke, though we will be happier if we see a clear reversal next week," said Ian Shepherdson, chief U.S. economist for High Frequency Economics in Valhalla, N.Y.

The four-week moving average of unemployment claims — a better measure of underlying trends — climbed 5,500 to 395,750. The rise in claims interrupted a downward trend that has kept them below the 400,000 threshold for four weeks.

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