Core producer prices up more than expected

06/13/2006

Tuesday June 13, 8:50 AM EDT

WASHINGTON (Reuters) - U.S. producer prices rose just 0.2 percent last month as food costs fell, but prices outside of food and energy rose a steeper-than-expected 0.3 percent, a government report showed on Tuesday.

The rise in the overall producer price index came in below the 0.4 percent expected on Wall Street, but economists had seen the core rate advancing just 0.2 percent.

Despite the stiffer-than-expected monthly rise in producer prices outside of food and energy, the 12-month gain held steady at the 1.5 percent increase seen in April, which could help temper inflation concerns.

The Labor Department said energy costs rose 0.4 percent in May, a much slower pace of advance than in March or April, when they rose 1.8 percent and 4 percent, respectively.

Residential natural gas prices slid 3.1 percent, the fourth straight monthly decline. The drop helped offset a 2.2 percent gain in gasoline prices, a 5.1 percent jump in the cost of liquefied petroleum gas and a 2.6 percent increase in home heating oil.

Food costs fell 0.5 percent, helping to restrain the advance in overall producer prices.

The report showed prices for capital goods rose more quickly than for nonfood, non-energy consumer goods. Capital equipment prices were up 0.3 percent last month, while core consumer goods prices rose just 0.2 percent.

Pharmaceutical prices shot up 1.9 percent, the cost of heavy trucks rose 1.4 percent and communication equipment costs advanced 0.4 percent. Car prices, however, dropped 0.4 percent.

Intermediate goods prices rose 1.1 percent, both overall and excluding food and energy, while crude goods prices rose 2 percent. Core crude goods prices climbed 6.2 percent.