MercoPress. South Atlantic News Agency

US producer prices rose 0.3% in January

Higher food, car and energy costs pushed United States producer prices up by more than expected in January, according to the latest report from the Labour Department.

The producer price index rose by 0.3% in January, above the 0.2% forecasted. The index measures wholesale inflation at factories, farms and refineries across the United States. Separate figures also suggest that US consumer sentiment unexpectedly weakened in early February, hit by low stock prices and higher gasoline costs.

The University of Michigan's preliminary consumer sentiment index for February fell to 87.4 from 91.2 in January. Analysts had expected the index - which is used as a gauge of future US consumer spending patterns - to creep up to 91.5.

Meanwhile, the so-called core producer price index, which excludes food and energy costs, rose by 0.4% - the largest monthly increase since January last year, the Labour Department reported.

The latest figures consolidate the belief that a new interest rate increase will become effective when the Federal Reserve meets in March.

The Fed has raised short-term interest rates 14 times since June 2004 to relieve the pressure of rising prices.

The producer price index was up 5.7% from January 2005, driven mostly by a 25% surge in the price of finished energy goods. However, core prices have increased just 1.5% in the last 12 months, suggesting energy price increases have not yet passed through to other goods.

The cost of residential electricity soared a record 3%, while the price of residential natural gas climbed 0.8%. But those increases were offset by a 3.5% drop in the price of gasoline and a 6.8% decline in liquefied petroleum gas.

Food costs rose 0.2% after a hefty 0.8% gain in December. The price of passenger cars climbed 1.1% and the price of light trucks was up 0.7%.