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We're Paying More: Food, Service Prices Soar Highest in 20 Months

U.S. producer prices posted their largest increase in 20 months in April as the cost of food and trade services surged, hinting at some inflation pressures at the factory gate.

The Labor Department said on Wednesday its seasonally adjusted producer price index for final demand rose 0.6 percent, the biggest gain since September 2012. Producer prices increased 0.5 percent in March.

Economists polled by Reuters had forecast prices received by the nation's farms, factories and refineries rising 0.2 percent. In the 12 months through April, producer prices advanced 2.1 percent, the biggest gain since March 2012, after rising 1.4 percent in March.

U.S. producer prices posted their largest increase in 1-1/2 years in April as the cost of food and trade services surged, hinting at some inflation pressures at the factory gate.
Anthony Zingale wires blender motors at the Vitamix manufacturing facility in Strongsville, Ohio. The Labor Department reported that producer prices posted their largest increase in 20 months in April, hinting at some inflation pressures at the factory gate.Mark Duncan / AP

Producer prices have been volatile in recent months, driven by swings in the trade services category. The PPI series was revamped at the start of the year to include services and construction.

Its short history and volatility makes it a bit difficult to discern a trend. While price pressures are creeping up at the factory gate, the overall inflation backdrop remains benign given the slack left over from the recession.

Last month, food prices surged 2.7 percent, the biggest rise since February 2011. That followed a 1.1 percent increase in March and marked the fourth consecutive month of gains in food prices.

A drought in California is putting upward pressure on food prices, leaving Americans confronting higher prices at the supermarket. Food prices were pushed up by a surge in the cost of meats, which recorded their largest rise since October 2003.

- Reuters