Gasoline, food boost US producer prices in February

People pump gas at a Sunoco gas station after the inflation rate hit a 40-year high in January, in Philadelphia, Pennsylvania, U.S. Feb 19, 2022. REUTERS/Hannah Beier/File Photo

WASHINGTON — U.S. producer prices increased more than expected in February amid a surge in the cost of goods like gasoline and food, which could fan fears that inflation was picking up again.

The producer price index for final demand rose 0.6 percent last month after advancing by an unrevised 0.3 percent in January, the Labor Department’s Bureau of Labor Statistics said on Thursday. Economists polled by Reuters had forecast the PPI climbing 0.3 percent.

A 1.2-percent jump in the prices of goods accounted for nearly two-thirds of the increase in the PPI. Goods prices were driven by energy products, which surged 4.4 percent after declining 1.1 percent in January. Goods prices had edged down 0.1 percent in January.

In the 12 months through February, the PPI shot up 1.6 percent after advancing 1 percent in January.

Government data on Tuesday showed consumer prices increasing strongly for a second straight month in February. But economists largely shrugged off the rise, arguing that difficulties adjusting the data for price increases at the start of the year continued to exert an upward bias on inflation.

READ: Gasoline, shelter costs drive US February inflation higher

Wholesale gasoline prices rose 6.8 percent last month. There were also increases in the prices of diesel and jet fuel. But prices for hay, hayseeds, and oilseeds fell as did those for iron and steel scrap and asphalt. Food prices rose 1 percent, amid increases in the costs of eggs and beef.

Excluding food and energy, goods prices rose 0.3 percent, matching January’s gain. This suggests that goods deflation, the major driver of lower inflation, was drawing to an end and services would need to pick up the slack in easing price pressure.

Services gain 0.3%

Services gained 0.3 percent in February after rising 0.5 percent in the prior month. A 3.8 percent increase in the costs of hotel and motel rooms accounted for a quarter the increase in services prices.

There were also increases in the costs of outpatient care, airline tickets as well as securities brokerage, dealing and investment advice. Portfolio management fees gained 0.2 percent after accelerating 5.9 percent in January.

READ: Strong services price hikes lifted US producer inflation in Jan

Portfolio management fees, healthcare, hotel and motel accommodation, and airline fares are among components that go into the calculation of the personal consumption expenditures (PCE) price indexes. The PCE price indexes are the inflation measures tracked by the Federal Reserve for it 2 percent target.

Financial markets expect the U.S. central bank to start cutting interest rates by June. Since March 2022, the Fed has raised its policy rate by 525 basis points to the current 5.25 percent-5.5 percent range.

The narrower measure of PPI, which strips out food, energy and trade services components, rose 0.4 percent in February after climbing 0.6 percent in January. The core PPI increased 2.8 percent year-on-year after gaining 2.7 percent in January.