WASHINGTON-Producer prices rose by the most in three years in August as the cost of energy surged, a government report showed on Thursday, but underlying inflation pressures were contained. The Labour Department said its seasonally adjusted producer price index increased 1.7 per cent last month, the largest gain since June 2009 and accelerating from July's 0.3 per cent rise. conomists polled by Reuters had expected prices at farms, factories and refineries to rise 1.1 per cent last month. Wholesale prices excluding volatile food and energy costs rose 0.2 per cent, slowing from a 0.4 per cent increase in July. The rise matched economists' expectations. Despite the rise in overall wholesale inflation last month, there is likely to be little pass-through to consumers given sluggish job growth and tepid domestic demand.
Consumer inflation is currently below the Federal Reserve's two per cent target. Officials from the US central bank were meeting for a second day on Thursday to deliberate on policy. The Fed is expected to announce the launch of a third round of the bond purchases at the end of the meeting, to spur the lackluster economic recovery. Overall producer prices last month were buoyed by a 6.4 per cent increase in energy prices, the biggest rise in three years. Energy prices, which were pushed up by a jump in the cost of gasoline, accounted for more than 80 per cent of the rise in wholesale prices last month. Energy prices had dropped 0.4 per cent in July. Food prices rose 0.9 per cent, the largest gain since November. Higher prices for dairy products accounted for a third of the increase in food prices last month. Food prices had increased 0.5 per cent the prior month and could remain elevated as a severe drought pushes up the cost of grain and soybeans. (Reuters)
