Thursday, October 30th6.4°C
23888
23823

US producer prices jumped in April for 2nd straight month, pushing annual rate to 2-year high

WASHINGTON - The prices that U.S. companies receive for their goods and services rose in April by the most in 19 months, a sign that inflation may be picking up from very low levels.

The producer price index rose a seasonally adjusted 0.6 per cent from March to April, the Labor Department said Wednesday, after a 0.5 per cent increase from February to March. April's increases were led by higher food prices and greater retailer and wholesaler profit margins.

Over the past 12 months, producer prices have risen 2.1 per cent, the biggest 12-month gain in more than two years. That figure is roughly in line with the Federal Reserve's 2 per cent inflation target. The producer price index measures price changes before they reach consumers.

Excluding the volatile categories of food, energy and retailer and wholesaler margins, however, the month-to-month increase in April was smaller: Core prices rose 0.3 per cent from March.

Ian Shepherdson, chief economist at Pantheon Macroeconomics, noted that the profit margins dropped sharply over the winter before increasing in the past two months, "so we can't yet say an upward trend is emerging."

Still, the report suggests that inflation may be picking up after coming in below 2 per cent for two years. That could reflect better economic health: Higher inflation is generally a sign of rising consumer demand.

Paul Dales, an economist at Capital Economics, noted that a sharp gain in profit margins for machinery and equipment wholesalers drove overall margins higher. That's a sign that companies are stepping up their purchases of large equipment after a weak first quarter, Dales said.

A key question is whether the sharp increases in producer prices of the past two months will flow into consumer prices. Wage increases have been weak, and unemployment remains high at 6.3 per cent. The squeeze for consumers means that manufacturers and retailers haven't been able to raise prices much. April's consumer price index will be released Thursday.

Dales forecasts that consumers will pay a bit more by 2015.

"We are expecting the stronger economic recovery and rising wage growth to push core (consumer) inflation above 2 per cent next year," he said.

The two months of big increases have lifted wholesale inflation from historically low levels. The producer price index rose just 1.2 per cent in 2013 after a 1.4 per cent increase in 2012.

Food costs jumped 2.7 per cent in April, the highest in more than three years, driven by an 8.4 per cent increase in meat prices.

Profit margins received by retailers and wholesalers rose 1.4 per cent in April, the same as in the previous month. Margins are rebounding after sharp drops over the winter months. Profits had been held down by discounting after the winter holidays and by harsh weather in January and February that kept shoppers at home.

Low inflation has enabled the Fed to pursue extraordinary stimulus programs to try to boost spending, hiring and economic growth. It has begun to unwind some of its stimulus, cutting its monthly bond purchases to $45 billion from $85 billion last year. The bond purchases are intended to lower long-term interest rates.

But the Fed has kept the short-term interest rate it controls at nearly zero since December 2008. Higher inflation could raise pressure on the Fed to increase that rate earlier than it had planned.

The Canadian Press


Read more Business News




Recent Trending




Today's Market
S&P TSX14462.26-65.311
S&P CDNX772.10-8.97
DJIA17114.48140.17
Nasdaq4541.482-7.744
S&P 5001986.00+3.70
CDN Dollar0.8932-0.0009
Gold1197.40-27.50
Oil80.83-1.13
Lumber322.00+0.40
Natural Gas3.715+0.066

 
Okanagan Companies
Pacific Safety0.12+0.02
Knighthawk0.01-0.005
QHR Technologies Inc1.13-0.02
Cantex0.045-0.015
Anavex Life Sciences0.17-0.01
Metalex Ventures0.03-0.005
Russel Metals32.36-0.21
Copper Mountain Mining1.97-0.05
Colorado Resources0.13-0.005
ReliaBrand Inc0.012-0.004
Sunrise Resources Ltd0.025+0.005
Mission Ready Services0.35-0.02

 



23015

FEATURED Property
1941017#120, 3550 Woodsdale Road
2 bedrooms 2 baths
$215,900
more details
image2image2image2
Click here to feature your property
Please wait... loading


Empty nesting: financial issues

Now that the children have ‘left the nest’, it is a good time to step back and take stock of your financial situation. Being on your own will probably cut household costs to some extent, b...


Keep your haunted home safe

Eerie sounds, spooky lights and Jack-o’-lanterns aglow—extra efforts at Halloween will keep visitors coming back for both tricks and treats. However, to keep the fun going, it’s imp...


What I learned in China

Photo: ContributedI will never be an expert on China. It is just too big, too complex and too old with layers of history and meaning that would take several lifetimes to unravel. As I said to my hosts...

_








Member of BC Press Council


23691