Editor's Note: The article was updated to include comments from CIBC World Markets and Forexlive.com
(Kitco News) - Producer prices for finished goods rose significantly by a seasonally adjusted 0.5% in the U.S. during March, the Labor Department said Friday.
On an unadjusted basis, the index for final demand moved up 1.4% for the 12 months as of the end of March. The report said the jump was "the largest 12-month advance since a 1.7% increase in August 2013."
The core index for PPI excluding the volatile food and energy sectors increased 0.6%. The data follows February’s surprise drop of 0.1% in the headline figure and 0.2% in the core data.
The report said the index for final demand services, which increased 0.7% in March was the biggest contributing factor to the surprise increase.
Andrew Grantham, senior economist at CIBC World Markets, said that the surprise rise in producer prices might not have a major impact on markets because it is still unclear how well correlated the “revamped” report will be with the consumer price index report coming out next week.
“The early consensus for next week’s CPI is for matching 0.1% increases in both core and headline, although the higher-than-expected PPI figures today and early import price data could imply a bit of upside risk,” he said.
Adam Button currency analyst at Forexlive.com, said that although markets aren’t focused on inflation at the momentum, “this could get markets a bit scared about rising prices.”
According to media reports, heading into the data, economists were expecting an increase of 0.1% in the headline figure. Consensus forecasts were also calling for the core rate to be up 0.2%.
By Neils Christensen of Kitco News; nchristensen@kitco.com
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