Prices paid to US producers rose more than forecast in May as fuel and food costs climbed.
The 1.4 per cent jump was the biggest gain since November and followed a 0.2 per cent increase in April, the Labour Department said today in Washington. So-called core prices, which exclude energy and food, increased 0.2 per cent.
Companies are paying more for energy and raw materials, which erodes profits and makes it more likely they'll be forced to raise prices. The report reinforces Federal Reserve policy makers' concern that inflation pressures are picking up.
"Inflation is clearly more of a concern and the Fed needs to be alert to it,'' Stephen Gallagher, chief US economist at Societe Generale in New York, said before the report.
A separate report from the Commerce Department showed housing starts fell 3.3 per cent in May to a 975,000 pace, less than anticipated.
Building permits, a sign of future construction, fell 1.3 percent to a 969,000 rate. Estimates ranged from gains of 0.6 per cent to 1.6 per cent.
Core prices were projected to rise 0.2 per cent, according to the survey median. Producers paid 7.2 per cent more for goods from May 2007, compared with a 6.5 per cent gain in the 12 months ended in April.
Excluding food and energy, the increase was 3 per cent from a year earlier, the same as in the prior month. Food was 0.8 per cent more costly, after no change the previous month.
Producers paid 9.3 per cent more for gasoline, the biggest increase since November, and diesel fuel gained 11.2 per cent, the report showed. Natural gas costs were up 5.7 per cent from the previous month.
Bloomberg