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Apr-16-2008

An Inflation Indicator Leaves the Fed in a Tough Spot

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CONTENTS:

Excluding food and energy prices, core wholesale prices rose 2.7 percent year-over-year in March compared to 2.4 percent in the previous month. (More...)
Statistics on producer prices will be released at 8:30 am Eastern Time. (More...)
Durable manufacturing goods prices rose 3.8 percent, following February's 1.6 percent increase. (More...)
For the most part, the earnings news since yesterday's close has been better than expected, so there was a modest uptick in the futures market ahead of the Producer Price Index. (More...)
Although "there were pipeline pricing pressures evident in today's report that argue for the Fed to let up on the aggressive rate-cutting campaign," said Merrill Lynch economist David Rosenberg, the Fed is nonetheless likely to continue cutting rates. (More...)
The cost of goods imported into the U.S. rose a greater-than-forecast 2.8 percent in March, Labor said last week. (More...)
"Bond prices slid in the face of some horrendous inflation data," said Bill Larkin, a portfolio manager at Cabot Money Management. (More...)
Estimates for core prices ranged from a 0.3 percent decrease to a 0.5 percent increase. (More...)
At the earlier stages of processing, the intermediate goods index moved up at a 19.4% SAAR, and prices for crude goods surged at a 73.4% SAAR after jumping at a 67.7% SAAR for the three months ended in December. (More...)
Plus there were controls on prices and wages that kept the reported rate of inflation down. (More...)
"We also need to be alert to risks to price stability," said Fed governor Kevin Warsh in a speech in New York Monday. (More...)
"Further increases in energy and other commodity prices suggest that the stronger trend will persist at least through midyear," says Smith. (More...)
On a monthly basis, consumer prices were up 0.8%, faster than the 0.6% forecasted by analysts. (More...)
WASHINGTON, DC, Apr. 15 -- There are growing indications that high gasoline and diesel fuel prices are having an increasingly adverse impact on the general U.S. economy, and federal lawmakers have started to respond. (More...)
Producers were paid 6.9 percent more from March 2007, compared with a 6.4 percent gain in the 12 months ended in February. (More...)
Treasuries dropped after the reports, with 10-year note yields rising to 3.56 percent at 9:45 a.m. in New York, from 3.51 percent late yesterday. (More...)
The S&P;/TSX Composite Index is up 113.21 points at 13,852.09, led by gains among energy stocks. (More...)
According to the minutes of that meeting, released last week, Plosser indicated that the Fed "could not afford to wait until there was clear evidence that inflation expectations were no longer anchored, as by then it would be too late to prevent a further increase in inflation pressures." (More...)
While the index is expected to remain negative in April, it is expected to increase a bit to a minus 16.0. (More...)
Home heating oil shot up by 13.1 percent and diesel fuel, used to power the nation's trucking fleet, increased by 15.3 percent. (More...)

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Excluding food and energy prices, core wholesale prices rose 2.7 percent year-over-year in March compared to 2.4 percent in the previous month. While the bigger than expected increase by the producer price index may raise some concerns about the outlook for inflation, the modest increase in core price may help to keep those worries somewhat subdued. The Labor Department will unveil additional inflation data on Wednesday with the release of its report on consumer prices in March. [1] WASHINGTON (Thomson Financial) - U.S. inflation at the wholesale level rose at a slower rate than expected in March, though core inflation, which strips out volatile food and energy prices, has risen at the fastest yearly pace in almost three years, the Labor Department said today. The department's Producer Price Index, which measures inflation pressures before they reach the consumer, rose 1.1 pct in March following a 0.3 increase in February.[2]

WASHINGTON (AFP) — Surging energy and food costs stoked U.S. wholesale prices by a much larger-than-expected 1.1 percent in March amid mounting concerns about accelerating inflation, a government report showed Tuesday. The Labor Department's monthly Producer Price Index (PPI), which tracks wholesale inflation pressures before they are passed on to consumers, showed prices rising at a much faster pace than most economists had anticipated.[3] U.S. wholesale price growth in March came in well above expectations, according to a report released by the Department of Labor on Tuesday, with significant increases in food and energy prices contributing to the faster than expected growth. The Labor Department said its producer price index rose 1.1 percent in March following a 0.3 percent increase in the previous month.[4]

Corn prices have surged 67% and wheat prices have shot up 73%. The argument that economists should look more at "core" inflation has to ring hollow with consumers who are taking a big financial bite every time they go food shopping and fill up their car's gas tank. "This is just another data point in the crescendo of negative news we've been getting for the past couple of months," said John Derrick, director of research for U.S. Global Investors, a money management firm. "Energy and food price increases continue to be the main story," he added. "The higher cost of energy is not just affecting Americans through the price of a gallon of gas, it's affecting the cost to put food on their table." We'll find out Wednesday just how much of these increased costs are being passed on to you and me when the Labor Department reports its Consumer Price Index.[5] The index for energy goods increased 2.9 percent in March from 0.8 percent in February, and prices for finished consumer foods rose 1.2 percent after declining 0.5 percent in February. Adolfo Laurenti, an economist with Chicago-based Mesirow Financial Holdings Inc., said elements such as food and energy will have the most impact on the Consumer Price Index, which will be released by the Bureau of Labor Statistics Wednesday. "It's very likely that those two categories will translate into higher consumer prices because you can buy grain ''' for preparing something like bread, and the PPI would catch that increase in cost of grain, and then that has to translate into higher costs for consumers," Laurenti said. "It's like a chain. Eventually they will filter down, and it's much more likely to filter down in the case of food and energy, in which there is relatively little transformation."[6]

The headline numbers: When you hear about change in the PPI, or wholesale inflation, it likely refers to the price of finished goods. These are products that are ready to sell to the consumer -- clothing, gasoline, books, finished food products. If prices are going up here, they are very likely going to be passed on to the consumer. Economists also put quite a bit of weight on the "core" inflation rate, both for producer prices and consumer prices. This eliminates food and energy products, both of which are very volatile, and can obscure underlying trends. Behind the headlines: Besides finished goods, the BLS also looks at prices of crude materials -- things that haven't been processed, such as logs and timber, iron ore, coal -- and intermediate materials -- things like flour, lumber and fabric that have been processed once but will be worked on further before they are sold to consumers. Rising prices in these categories are likely to eventually filter through to consumers, but they are further removed, so the pressure isn't so immediate. The BLS data also is broken down by industry and commodity, but these don't carry as much weight with economists.[7] Economists, according to the New York Times, expected the prices to increase 0.6 percent in March. Typically, the general train of thought is that when goods producers are hit with higher prices, they will pass them off on the consumers. This was not the case for products such as automobiles and clothing in March. The lowering of this core number takes a bit of the pressure off the Fed as it tries to control inflation with the slowdown of the American economy at its meeting later this month.[8]

Excluding food and energy costs, the Producer Price Index rose just 0.2 percent. The Federal Reserve has repeatedly noted that it is concerned about the mounting threat of inflation, but feels that the need to stabilize the markets and promote growth outweigh those concerns. The Fed is expected to cut its benchmark interest rate by another quarter point this month.[9] The report also showed that the core producer price index, which excludes food and energy costs, edged up 0.2 percent in March after rising 0.5 percent in February.[1]

U.S. producer prices advanced by a more-than-expected 1.1 percent in March after energy costs jumped, Labor Department data on Tuesday showed, but core inflation at the producer level was more subdued.[10] U.S. producer prices jumped a larger-than-expected 1.1 percent last month, as surging food and energy costs continued to fuel inflationary pressures all along the manufacturing pipeline, the Labor Department said Tuesday.[11]

The Producer Price Index for Finished Goods increased 1.1 percent in March, seasonally adjusted, the Bureau of Labor Statistics of the U.S. Department of Labor reported today. This advance followed a 0.3-percent rise in February and a 1.0-percent increase in January.[12] The Labor Department said its producer price index rose 1.1 percent in March following a 0.3 percent increase in the previous month.[1] The Labor Department reported Tuesday that the Producer Price Index, which measures inflation pressure at a wholesale level, rose 1.1% in March, following a 0.3% increase in February.[13] So far, the most notable consequences of the rate cuts are a drastically weakened dollar and surging commodity prices. The Labor Department reported Tuesday that its Producer Price Index, which measures wholesale prices, jumped 1.1% in March, the second biggest gain in the past 33 years and much higher than forecasts.[5]

Government statistics suggested that energy prices climbed more quickly in March. Wholesale prices for finished energy goods grew 2.9% during the month after increasing only 0.8% in February, the U.S. Bureau of Labor Statistics said Apr. 15 in its latest Producer Price Index (PPI).[14] The U.S. inflation as measured by the Producer Price Index for the month of March rose 0.7% according to the estimates, off course the incline is due to sky-rocketing energy prices, while prices of raw materials rose last month by 0.3%, the yearly reading is expected to come at 6.1% following a 6.4% in February.[15] The March producer price index rose a far stronger than expected 1.1% (7% year-over-year) as the pressure came from non-core food and energy prices.[16]

The Producer Price Index for Intermediate Materials, Supplies, and Components rose 2.3 percent in March subsequent to a 0.8-percent increase in the prior month. This price acceleration was broad based as the indexes for intermediate energy goods, materials for both durable and nondurable manufacturing, intermediate foods and feeds, and materials and components for construction all rose more in March.[12] The Producer Price Index for Crude Materials for Further Processing climbed 8.0 percent in March following a 3.7-percent increase in February. Most of this acceleration can be traced to the index for crude energy materials, which surged in March after rising at a slower rate a month earlier. Prices for crude foodstuffs and feedstuffs and for crude nonfood materials less energy also moved up more than they had in February.[12] For the first 3 months of 2008, the Producer Price Index for the Net Output of Total Mining, Utilities, and Manufacturing Industries advanced at a 16.4-percent annualized rate compared with a 7.1-percent annualized rate of increase in the final quarter of 2007. In March, the Producer Price Index for the Net Output of Total Mining, Utilities, and Manufacturing Industries was 110.3 (December 2006 = 100), 8.2 percent above its year-ago level.[12]

For the entire first quarter of 2008, the finished goods index showed 10.2% seasonally adjusted annual rate (SAAR), just slightly under the 11.5% SAAR increase in the last quarter of 2007. "In all, this report was considerably less favorable than the previous month's report and is a signal that the trend in producer price inflation is strengthening," says Aaron Smith, senior economist at Moody's.[17] During the first quarter of 2008, the finished goods index rose at a 10.2-percent seasonally adjusted annual rate (SAAR), after climbing at an 11.5-percent SAAR during the fourth quarter of 2007. Much of this slower rate of increase can be traced to prices for finished energy goods, which moved up at a 22.5-percent SAAR for the 3 months ended in March after jumping at a 44.1-percent SAAR for the 3 months ended in December.[12]

Energy prices have been on a steady increase since October, with 44.1% SAAR in fourth quarter 2007 and now 22.5% in first quarter 2008. "Over half of this acceleration can be attributed to the liquefied petroleum gas index, which turned up 4.2% in March after dropping 9.7% a month earlier," writes the Labor Department in its monthly report.[17]

WASHINGTON (AFP) — Surging energy and food costs stoked U.S. wholesale prices by much more than expected in March, according to a government report Tuesday that renewed fears about accelerating inflation. The Labor Department released its latest inflation snapshot as concern mounts about rocketing global commodity prices which have pushed food prices higher.[18] FXstreet.com (Barcelona) - Producer prices have posted a higher than expected increase in March, fuelled by food and energy, as the Core PPI has posted a moderate increase, according to data released by the U.S. Labor Department.[19] Before the open the Bureau of Labor Statistics revealed that producer prices rose 1.1% in March, which was well ahead of the 0.6% consensus estimate. That increase was driven primarily by higher energy and food costs. Excluding those items, producer prices were up just 0.2% in March. The latter figure left core producer prices up 2.7% year-over-year and was generally met with some relief by traders that it wasn't any worse. Accordingly, the futures market pushed higher after its release and presaged a positive start for stocks.[20] Earlier today, we saw that inflation in the United Kingdom moderated, and now comes the turn for the United States, as core producer prices rose 0.2% in March after 0.5% in February, the core yearly PPI rose 2.7% less than forecasts that hinted for a 2.8% increase, confirming that without food and energy jump, infla-tion is starting to get well anchored.[21]

Through the year's first three months, the PPI has been growing at a whopping 10.2 percent annualized rate. Rising costs of food products, combined with a run-up in the price of energy products such as diesel fuel and gasoline, drove much of the jump in producer prices. Because food and energy prices are so volatile, economists generally prefer to strip out those two elements and focus on the "core" reading.[11] Oil prices surged to a new high, passing $113 a barrel, and the government reported that prices at the wholesale level jumped 1.1 percent in March. '''These are going up way too rapidly,''' said economist Joel Naroff of Naroff Economic Advisors. '''This is the money that the average person has to spend, and as a result they don'''t have a lot of money left over for other things.''' Food and energy prices tend to move up and down more quickly than other goods, but lately they'''ve only been moving in one direction.[22] The inflation survey was released as world oil prices rocketed to new record peaks Tuesday, as a key oil futures contract traded in New York briefly struck an all-time high of 113.66 dollars a barrel. Economists say rising energy costs have impacted wholesale food prices as farmers pay more to fuel their tractors and transport their products to market.[3] NEW YORK (CNNMoney.com) -- Bond prices slid Tuesday after a government report showed wholesale inflation spiked dramatically in March due to rapidly rising energy and food costs.[23]

The wholesale-price report is based on figures for the Tuesday of the week that includes the 13th of the month. On that basis, crude oil climbed 17 percent in March on the New York Mercantile Exchange, and natural gas futures prices rose 19 percent. Oil has risen even more so far this month. Costs of intermediate goods, those used in earlier stages of production, increased 2.3 percent, after a 0.8 percent gain the prior month. They rose 10.5 percent from a year ago.[24] For the past 12 months, wholesale prices increased by 6.9 percent and core inflation was up 2.7 percent, the biggest year-on-year increase in nearly two years, the report shows. The readings on wholesale prices reflect cost pressures before they reach consumers.[25] WASHINGTON -- U.S. wholesale prices surged on higher food and energy prices during March, but core inflation retreated to a mild rate after two months of big increases.[26] PPI rose 1.1% on energy prices, while the yearly reading rose 6.9%. Less core inflation means that the feds wont have to worry about inflation when they are cutting rates, it'''s a comfort for the economy'''s watchers, despite the fact that the feds did mention that inflation will moderate with slowing economic growth, but the credibility of the fed in the markets is not something we can all depend on, but with these facts, inventors took the news rather in a good way, and the U.S. dollar started to appreciate and regain some of its severe losses.[21] We all understand the effect of higher food and energy prices not only on the United States but all over the world, so I think what we should really look at is the core prices, which according to the Fed'''s minutes should be anchored with slowing economic growth and it wont be a problem for the economy giving the fed a freehand to cut rates with no worries that inflation will create a hitch in the future. Inflation indicators might not be major market movers nowadays as the main fo-cus is still growth rather than anything else, but it certainly helps policy makers and economic forecaster bet more on the magnitude of the next FOMC move in interest rate, and that is always a major market mover, so what I am trying to say that the effect can be significant in an indirect way this time.[15]

Energy prices jumped 2.9%, the largest gain since November, and food prices were up 1.2%. Despite the inflation numbers, Lavorgna still thinks that the Federal Reserve will cut interest rates 50 basis points at its upcoming meeting. "I think most of the inflation story is a food and energy story, which is why I think he Fed will look past the data," Lavorgna said.[13]

Core CPI, which excludes volatile food and energy prices, is used by the Fed as a more stable inflation indicator. While the Fed officially uses the core personal consumption price index as its inflation guide, core consumer prices are a very close substitute.[27] "Increases in food and energy prices have pushed up overall consumer prices and are putting upward pressure on core inflation and inflation expectations.[5]

Over the last twelve months, wholesale prices have risen 6.9% while core inflation rose 2.7%, which is the largest year-over-year gain in close to two-years. Energy prices posted their biggest gain since November, up 2.9% in March, while gasoline prices rose 1.3% and natural gas rose 4.2%.[28] WASHINGTON (AP) — Inflation at the wholesale level soared in March at nearly triple the rate that had been forecast as energy prices kept rising and food costs posted a much bigger jump than anticipated.[29]

Prices for food used in finished products rose even more quickly, by 1.2 percent, while energy costs increased 2.9 percent. Wholesale prices excluding those two items increased at a far more modest rate of 0.2 percent.[30] U.S. wholesale prices jumped sharply in March, driven by the same rising food and energy costs that are reshaping household budgetsand raising political tensions in some parts of the world.[30]

Rising energy costs are of escalating concern to bond investors, since a sustained rise in food and crude oil costs may stoke rising inflation pressures that sharply erode longer maturity bond prices over time.[13] The effect of the rise was muted on Wall Street though, as it fell short of forecasts for a 1.8% rise. "It's a pretty ugly report," said Joseph Lavorgna, chief U.S. economist at Deutsche Bank, "not just because headline is up so much on rising food and soaring energy prices, but the significant re-emergence of inflation pressure at an earlier stage of processing, mainly at core crude and core intermediate prices."[13] Laurenti said the results in Tuesday's Producer Price Index ''' while not unexpected by economists ''' still warrant concern. "I think these numbers are really worrisome in terms of inflation because they are consistently high and they are increasing, and it's really giving some sense of inflation," Laurenti said. "It's mostly a story of energy, which is not surprise, and it's more and more becoming a story of food. Overall, I don't think it's a good report."[6] "Wholesale costs are rising and the consumer should expect more shocks at the supermarket and the gas station," said Joel Naroff, the president of Naroff Economic Advisors. The monthly Producer Price Index (PPI), which tracks the wholesale cost of goods and food as they leave the factory floor and farm gate, showed prices rising at a much faster clip than in previous months.[18] The Producer Price Index, released monthly by the Bureau of Labor Statistics, measures the average change in selling prices received by domestic producers of goods and services over time. It examines crude, intermediate and finished goods, and shows trends within the wholesale markets. It is often a harbinger of another economic indicator, the Consumer Price Index.[6] The Department of Labor today released its producer price index for March, showing that finished goods prices increased 1.1% overall, much higher than previously forecast.[17] Tuesday, April 15, 2008 6:50:38 AM - The dollar gained on the sterling but was little changed in choppy dealing versus the euro and sterling Tuesday morning in New York. Traders will pay close attention when the Department of Labor releases its producer price index for the month of March, which is a key measure of inflation.[31]

The sharp rise in the department's producer price index (PPI), a measure of inflation at the wholesale level, was exceeded only by a 2.6 percent surge last November and was much bigger than the 0.4 percent hike expected by analysts.[25] Definition : The producer price index (PPI) is the first indicator of inflation each month. It is a measure of wholesale prices at the producer level for consumer goods and capital equipment.[32] The core PPI rate was also weighed down in part by a 0.2pc decline in car prices. The government's monthly Producer Price Index (PPI), which tracks inflation pressures before they reach consumers, showed headline inflation accelerating at a much faster pace than anticipated.[33]

The producer price index surged 1.1 per cent in March, well ahead of the expected 0.6 per cent rise. Blame it on rising food and fuel prices; once they are stripped out, the core rate slips to a 0.2 per cent increase, bang-on expectations.[34] The Produced Price Index for Finished Goods has risen 1.1% in March, instead of the 0.7% increase expected by the market analysts, nevertheless, the core PPI, excluding the influence of food and energy, has risen 0.2% on the month, a somewhat lower increase than the 0.5% posted in February or the 0.4% in January.[19]

The bigger than expected increase by the index was due in large part to a sharp rise in energy prices, which rose 2.9 percent in March after rising 0.8 percent in February.[35]

Figures due tomorrow may show the consumer price index rose 0.3 percent in March after being unchanged the prior month, according to economists surveyed. Investors are betting Fed officials will lower the benchmark rate by at least a quarter percentage point later this month after reducing it by 2 percentage points so far this year.[24] Economists expect consumer prices to rise 0.3 percent, while core prices are expected to edge up 0.2 percent. In other economic news, the Federal Reserve Bank of New York released its report on manufacturing activity in the state of New York on Tuesday, showing that activity unexpectedly stabilized in April after deteriorating in February and March.[1] Consumer prices for March are due out tomorrow and estimates are calling for a gain of 0.3 percent overall and 0.2 percent at the core. The Empire State Mfg. Survey was a pleasant surprise this morning, but the pricing component of the report rose 7 points to 57.3.[36]

New data from the U.S. Department of Labor showed that the prices paid by producers rose 1.1 percent in March compared to the month before - one of the largest monthly price increases in recent decades. They have risen nearly 7 percent during the past year.[30] WASHINGTON (Xinhua via COMTEX) -- U.S. wholesale prices rose by 1.1 percent in March, the second-largest increase in 33 years, the Labor Department reported Tuesday.[25] The Labor Department reported Tuesday that wholesale prices rose by 1.1 percent last month, the largest increase since a 2.6 percent rise last November, which had been the biggest one-month jump in 33 years.[37]

The U.S. Department of Labor reported today that U.S. wholesale prices surged 1.1 percent in March, the second-largest increase in the past 33 years, exceeded only by a 2.6 percent rise in November 2007.[38] Wholesale prices increased 1.1% in March, seasonally adjusted, the Bureau of Labor Statistics of the U.S. Department of Labor reported. This advance followed a 0.3% rise in February and a 1.0% increase in January.[39]

The latest sign that inflation is very much on the boil came as the U.S. Department of Labor reported that the prices paid to manufacturers and other producers climbed 1.1 percent in March, more than double forecasts and up from a 0.3 percent gain in February.[9] If disappointing earnings were the big worry over the past two trading sessions, inflation could be the big concern on Tuesday after the U.S. Labor Department reported that producer prices rose at nearly twice the expected rate last month.[34] Producer prices are one of three monthly inflation gauges reported by the Labor Department.[24]

The Labor Department's Producer Price index (PPI) jumped 1.1% last month, topping forecasts for a rise of 0.6%.[23] Following this morning's news that the Producer Price Index (PPI) increased 1.1% in March, Fed funds futures have slipped.[40] The Producer Price Index for the Net Output of Total Mining, Utilities, and Manufacturing Industries rose 2.3 percent in March following a 0.7-percent increase in February. (Net output price indexes are not seasonally adjusted.)[12] The Producer Price Index for March showed an increase of 1.1 percent overall -- more than double the forecast.[7]

Before seasonal adjustment, the Producer Price Index for Finished Goods climbed 1.9 percent in March to 175.4 (1982 = 100).[12] The Producer Price Index for finished goods rose 0.3 percent in February, and 1 percent in January.[6] The producer price index for finished goods rose 1.1% on a seasonally adjusted basis after a.[26]

The core producer price index, which excludes volatile food and energy, rose 0.2%.[41] Food and energy products are considered by economists to be volatile, so producer prices for finished goods excluding food and energy are known as core producer prices.[6]

Over the same period, the index for finished energy goods increased 20.4 percent, prices for finished consumer foods moved up 5.8 percent, and the index for finished goods less foods and energy advanced 2.7 percent.[12] By contrast, partially offsetting the acceleration in finished goods prices, the rise in the index for finished goods less foods and energy slowed to 0.2 percent from 0.5 percent in February.[12]

By contrast, partially offsetting the acceleration in the index for crude energy goods, the coal index fell 0.9 percent in March subsequent to a 1.0-percent gain in the prior month. Natural gas prices moved up slightly less than they had in February - 11.4 percent compared with 11.5 percent.[12] Prices charged to producers for goods received at the earliest point in production rose 2.3 percent in March after increasing 0.8 percent a month earlier and the crude goods index advanced 8.0 percent following a 3.7 percent increase in February.[42] The index for crude energy materials jumped 13.4 percent in March following a 5.6-percent advance in the preceding month. This faster rate of increase is attributable to prices for crude petroleum, which surged 17.5 percent after rising 0.6 percent in February.[12] For crude energy materials, March's PPI showed a 13.4% jump in the index following a 5.6% advance in February. It traced the bigger increase to a 17.5% jump in crude oil prices which followed a 0.6% rise a month earlier.[14] Natural gas prices advanced slightly less than in February (11.4% compared with 11.5%) within the crude energy price index, it said. Crude oil prices were the biggest uncertainty as the U.S. Energy Information Administration issued its latest monthly short-term energy outlook Apr. 8. It said prices for West Texas Intermediate crude, which averaged $72.32/bbl in 2007, are projected to average $101/bbl in 2008 and $92.50/bbl in 2009.[14] "Sadly, the natural gas crisis is one that Congress has some degree of control over: natural gas prices are set regionally, not globally, and the 430 percent increase in U.S. natural gas prices since 2000 is largely due to federal energy policies that drive up demand (e.g. for cleaner electricity) while restricting access to domestic supplies. With the economy in trouble and energy prices largely driving the inflationary and recessionary threat, it's critical that Congress include domestic natural gas supply on its agenda this year. In addition to increasing energy diversity and efficiency, we strongly encourage Congress to enact domestic energy supply legislation such as the National Environment and Energy Development (NEED) Act (H.R. 2784). Congress must advance other low-emission options such as carbon capture and sequestration, nuclear, energy efficiency and renewable energy programs to meet climate policy objectives."[38] Energy prices jumped 2.9 percent for March, with natural gas up 4.2 percent, and the U.S. economy continues to show signs of weakening.[38]

U.S. energy prices surged a monthly 2.9 percent in March, marking a dramatic acceleration compared with a 0.8 percent rise in February.[18]

Bigger increases But the energy price increases in March were greater further up the wholesale chain, according to the report. It said the index for intermediate energy goods climbed 5.9% last month following a 1.1% gain in February. "Leading this acceleration, the index for diesel fuel surged 15.3% after rising 0.9% in February.[14] Gasoline prices slightly offset acceleration of the intermediate energy goods index by advancing 1.3% in March, compared with a 2.9% increase in February, the report continued.[14]

Energy goods have posted a 2.9% increase in March, from a 0.8% rise in February, and prices for finished consumer foods have increased 1.2% after having declined 0.5% in February.[19] For the first quarter 2008, wholesale prices increased 10.2% at a seasonally adjusted annual rate (SAAR), after climbing at an 11.5% SAAR during the fourth quarter 2007. Much of this slower rate of increase can be traced to prices for finished energy goods, which moved up at a 22.5% rate for the first quarter 2008 after jumping at a 44.1% rate for the fourth quarter 2007.[39] Core inflation in the first quarter 2008 (finished goods less foods and energy) increased at a 5% SAAR after rising at a 2.2% rate during the fourth quarter 2007.[39]

The increase in core prices brings the annualized core inflation rate for the first three months of the year to 5 percent.[7] For the past 12 months, wholesale prices are up by 6.9 percent and core inflation is up by 2.7 percent, the biggest year-over-year increase in nearly two years.[29]

Chicken and other poultry rose nearly 7 percent. The U.S. is wrestling with the worst food inflation in 17 years, and analysts expect that new data out this week is going to show it's getting worse. The situation is putting a squeeze on families and forcing bakeries, bagel shops and delis to explain price increases to their customers.[43] U.S. food prices rose 4 percent in 2007, compared with an average 2.5 percent annual rise for the last 15 years, according to the U.S. Department of Agriculture.[43] Food costs, which had fallen by 0.5 percent in February, leapt by 1.2 percent last month, propelled upward by big gains in vegetables and beef and the biggest increase in rice prices in more than five years. Those were far higher increases in food prices than expected.[29]

The headline PPI reading jumped 1.1 percent in March, mostly due to soaring energy and food prices, and was almost double what most economists had anticipated.[18] WASHINGTON (MarketWatch) - Wholesale prices surged 1.1% in March, led by rising energy and food prices, the Labor Department reported Tuesday.[41] The estimate of prices paid by American producers increased 1.1 percent in March, the Labor Department said Tuesday, after a 0.3 percent rise in February. Coupled with this, gasoline and home prices also flourished.[8] U.S. producers paid 1.1 percent more for finished goods in March, which followed a 0.3 percent rise in February, the U.S. Labor Department said Tuesday.[44]

Statistics on producer prices will be released at 8:30 am Eastern Time. Economists expect this key measure of wholesale inflation to rise 0.5% in March, accelerating from the 0.3% increase shown in February. [31] Stocks and indices are also likely to be negatively affected as an increase in the PPI will point to higher interest rates which the stock market doesn't like to see''' For currencies the effect of high inflation can be uncertain, as from one side future interest rate hikes and modifications in the monetary policy is considered a strength to the currency; while at the same time high producer prices lower competitiveness in the overall markets.[32] PPI is considered to be a better measure of inflation as it captures factory prices, excluding taxes, transport costs and trade margins. By tracking the difference between the inflation based on retail prices, measured by the various consumer price indices, the government will be better able to track inflationary causes'''for instance, whether it is because of increase in producer prices triggered by increased input costs such as fuel or because of speculative trade. Such speculation could be happening now, Sen said, as prices of most commodities, especially grains, are far lower in India than in rest of the world.[45] "PPI mostly gets the cost of the physical goods, but what people buy today mostly is services," Laurenti said. He cited technological products as an example of a disconnect between the Producer Price Index and the Consumer Price Index.[6] Laurenti said the relationship between the Producer Price Index and the Consumer Price Index has lessened somewhat in recent years due to the fact that physical goods are only one component of today's marketplace.[6]

The producer price indexes for all commodities foreshadow changes in the Consumer Price Index. An increase (or decrease) in these producer price indexes today are likely to be followed by a comparable increase (or decrease) in the Consumer Price Index.[32]

New Delhi: Although a committee would have by the end of this week cleared the decks for a new consumer price index to replace the Wholesale Price Index, or WPI, which constantly understates inflation, the government is unlikely to launch it as it is still unsure how to source the data.[45] Bovino added that given the surprise with the PPI, there could be some shockwaves from consumer price index data, which will be released Wednesday.[13]

Bottleneck: A scene at a grains market in Haryana. The new index, to be called the producer price index, or PPI, will have 2004-05 as its base year, and cover over 2,000 items, with a higher share of manufactured articles, against the 435-item WPI. Planning Commission member and chairman of the PPI working group Abhijit Sen said, '''I'''m looking to submit the report this week,''' before adding, '''I understand the sourcing of data remains a problem.[45] NEW YORK (Associated Press) - The producer price index, due out Tuesday, is expected to rise for a third straight month in March, as producers pay more for raw materials.[46] Analysts had expected a rise of up to 0.5 percent during the month for the overall producer price index.[44]

At the earlier stages of processing, prices received by producers of intermediate goods rose 2.3% after increasing 0.8% a month earlier, and the crude goods index advanced 8.0 percent following a 3.7% rise in February.[12] Prices for home heating oil and kerosine also rose last month after falling in February, while the indexes for diesel fuel and asphalt rose farther than in the previous month, according to the PPI. "Conversely, partially offsetting the acceleration in finished energy goods prices, the rise in the index for gasoline slowed to 1.3% from 2.9% in February.[14] By contrast, slightly offsetting the acceleration in the intermediate energy goods index, gasoline prices advanced 1.3 percent compared with a 2.9-percent rise in February.[12] The rise in the finished energy goods index accelerated to 2.9 percent from 0.8 percent in February. Over half of this acceleration can be attributed to the liquefied petroleum gas index, which turned up 4.2 percent in March after dropping 9.7 percent a month earlier.[12] The rise in the index for finished goods less foods and energy (core inflation) slowed to 0.2% from 0.5% in February.[39]

Excluding volatile energy and food costs, the core inflation was better behaved in March, rising by just 0.2 percent, down from a 0.5-percent increase in February.[25] Core inflation, which strips out volatile food and energy costs, rose a much tamer 0.2pc, the U.S. Labour Department said yesterday.[33]

April 15 (Bloomberg) -- Prices paid to U.S. producers rose almost twice as much as forecast in March, reflecting higher fuel and food costs that threaten a pickup in inflation.[24] Prices paid to producers in the United States rose almost twice as much as forecast last month, reflecting higher fuel and food costs that threaten a pick-up in inflation.[47]

"Businesses will have difficulty passing higher input costs through to consumers, but the report is nonetheless a reminder that inflation pressures are elevated despite weak growth." Energy showed the most inflation in March, as prices went up 2.9% in contrast with its 0.8% decline in February.[17] "There was little good news in the March PPI" noted Moody's Economy.com's Mark McMullen. Even though inflation at the wholesale level has been "very rapid" in the first quarter of 2008, he continued, manufacturers will find it difficult to pass on their higher costs to American consumers because the economy's weakness has caused a sag in retail demand.[11] At the earlier stages of processing, the intermediate goods index moved up at a 19.4-percent SAAR during the first quarter of 2008 after increasing at a 14.5-percent SAAR during the fourth quarter of 2007, and prices for crude goods surged at a 73.4-percent SAAR for the 3 months ended in March after jumping at a 67.7-percent SAAR for the 3 months ended in December.[12] For the 12 months ended in March, prices received by manufacturers of intermediate goods rose 10.5%, and the crude goods index advanced 31.4%.[39]

The report also showed an acceleration in the pace of price growth, with the prices paid index rising to 57.3 in April from 50.6 in March while the prices received index rose to 20.8 from 15.7. With the increase, the prices paid index reached its highest level since late 2005.[1]

Heating oil prices shot up 13.1% while the nation's transportation sector saw an even worse inflation rate as wholesale diesel prices rose 15.3% in March.[28] Prices for finished consumer goods rose 1.2 percent over February's 0.5 percent inflation rate.[44] Food and feed prices increased 2.9 percent, accelerating beyond February's 2.3 percent inflation rate, the department said.[44] Excluding food and energy, core inflation for producers slowed to 0.2 percent after a rise of 0.5 percent in February, the department said.[44] Core inflation, which excludes energy and food, was better behaved last month, rising by just 0.2 percent, down from a worrisome 0.5 percent rise in February.[29]

Core inflation, which excludes food and energy prices, moderated to a 0.2% gain after rising 0.5% in February.[13] The rise in overall wholesale inflation stemmed from a 2.9 pct gain in energy prices, the largest gain since November, and a 1.2 pct rise in food prices.[2] Energy prices rose nearly 3% (20% year-over-year) as food prices rose 1.2% (6% year-over-year) as the core components were fairly contained after the stronger gains over the prior two months.[16] The so-called "core" PPI number, which excludes food and energy prices, rose a more modest 0.2%, in line with expectations.[5]

Of course, gains in food and energy prices continue to push prices higher with the year on year PPI up 6.9 percent.[36] Outside of food and energy, the price of soap and detergent jumped 2 percent, the biggest gain in more than two years, while pet food increased by 1.3 percent.[29]

Core prices, which exclude food and energy products, rose 02 percent, as expected.[7] Excluding food and energy, intermediate prices rose 1.1 percent after increasing 0.6 percent.[24] Bullion for June is up $5 at $933.90 a barrel despite the U.S. dollar showing some strength after data showed that U.S. producer prices rose 1.1 percent to smash expectations. NovaGold (NG.TO) and Barrick Gold (ABX.TO) are in the green after saying they are studying the viability of ramping up production at their Donlin Creek project.[4] So- called core producer prices that exclude fuel and food increased 0.2 percent, as forecast.[24] Core producer prices, which exclude the volatile food and energy sectors, are projected to rise by 0.2%. This would represent a slowdown compared tothe previous months reading of a 0.5% increase.[31] Global Insight economists expect higher energy and food costs to prop up producer prices.[46] Economists said increasing wholesale costs are likely to inflate consumer prices and could pinch household budgets which are already being buffeted by a deep housing market slump, a related credit crunch and rising job cuts. If American consumers have to pay more to drive their cars and put food on the dinner table, it could force them to cut back on other spending and further dent economic growth.[18] Higher food and fuel costs will further sap consumer spending and will cut into companies' profits. "Cost pressures are building and will continue to build for a few quarters before they recede,'' Michael Gregory, a senior economist at BMO Capital Markets in Toronto, told Bloomberg News before the P.P.I. data were released.[9]

Economist Steve Affinito told BloggingStocks Tuesday the March statistic is more evidence of the effects of record-high oil prices. "It's another hot number, and cost pressures are increasing," Affinito said. "The core PPI is somewhat deceptive because we can see the effect of high oil costs working their way through the commercial process.[48]

Actual: An off-the-charts 1.1 percent increase overall, and a spot-on 0.2 percent increase in core prices. What was expected: Economists at Moody's Economy.com expected to see "significant" price pressures in this report -- and they weren't disappointed.[7] Economists were looking for a reading of minus 30. The indicator stayed well below its historical average of 30 points. The report added that economic expectations were affected by the extraordinary high price pressure in Germany this month. ZEW President, Wolfgang Franz stated 'A growth rate for Germany of 1.7 percent this year is still realistic."[31]

In recent years, producers have found it tough to squeeze higher prices from grocers and retailers, and the result has been a squeeze on manufacturers' profit margins. As their cost pressures mount, the effort to raise retail prices will become even tougher. For the U.S. economy, the importance of that struggle is this: If inflationary pressures remain largely contained, the Federal Reserve can continue to cut interest rates in an effort to spur the slumping U.S. economy.[11] Everyone is looking at the wrong number. While the producer prices for goods are rising fast, but producer prices for services are notand it may be the latter which is more important. It used to be that the BLS just tracked the producer price of goods. Over the past few years the BLS has been extending its coverage to a lot of service industries, which are a much bigger part of the economy than goods. In those service industries, inflation is quite lowonly 1.2% over the last year.[49] Rising oil and food prices fuel a much bigger jump than expected in producer prices. That's hurting the economy, and has to have the Fed worried.[5] The increase in oil prices was certainly reflected in producer prices, as was the increase in food prices.[50]

When the economy slows down, the resulting drop in demand normally takes some of the pressure off inflation. These are not normal times: Even as the economy is slumping, oil prices are rising and food prices are jumping.[22]

Dan Shortt from Toronto, Canada writes: It's definitely ironic that the "core inflation" measurements don't include food or energy prices. These are two of the commodities whose prices can have the most immediate influence on our economy. yet they aren't considered to be part of the "core" of the economy.[34]

"For now the Fed is operating under the assumption that the slowing economy and excess slack will ease price pressures at the core level. Energy and commodity prices are also expected to level off, although there is a high degree of uncertainty to this assumption," economists at Societe Generale said in a briefing note.[3] "The soft economy will take care of the inflation problem, it always does." Standard & Poor's economist Beth Ann Bovino said she believes that the current recession will be modest, yet with inflation climbing, the subsequent recovery will also be weak as the Fed will be racing to beat rising prices and will have to raise rates more quickly than it has during previous recoveries.[13] Commodity prices are mostly set globally and are more sensitive to global demand and currency debasement induced inflation than labor in my opinion. It is true that our economy is nowdays mostly based on services but we stil need to pay for imported goods. so I do not really know if the Fed can really cut rates that easily.[49]

We are on a ship without a rudder or an anchor. An even greater impediment to achieving the monetarist goal involves personnel acquiring a technical staff for Congress as well as the Fed which does not confuse the supply of money wi9th the supply of loan-funds; people who can make the proper distinctions between means-of-payment money and liquid assets; know the difference between money creating institutions and financial intermediaries; recognize aggregate monetary demand is measure by the flow of money ''' not nominal GDP; recognize that interest rates are the price of loan-funds, not the price of money; that the price of money is represented by the price level, that inflation is the most important factor determining interest rate3s operating as it does through both the demand for and the supply of loan funds, and above all else recognize that even a temporary pegging of a series of federal funds rates over time forces the Fed to abdicate its power to regulate properly the money supply.[51] The effect of tying open market policy to a fed. funds bracket or rate is to supply additional (and excessive legal reserves ) to the banking system when loan demand increases. Since the member banks have no excess reserves of significance the banks have to acquire additional reserves to support the expansion of deposits resulting from their loan expansion. If they use the federal funds market, which is typical, the rate is bid up and the Fed responds by putting through buy orders, reserves are increased and soon a multiple volume of money is created on the basis of any given increase in legal reserves. The Fed's technical staff either never learned, or forgot, how Roosevelt got his "2 percent war". This was achieved by having the Fed stand ready to buy (or sell) all Treasury obligations at a price which would keep the interest rate on "T" bills below one percent, and long-term bonds around 2-2 1/2%, and all other obligations in between. This was achieved through totalitarian means, involving the control of total bank credit and the specific rationing of that credit.[51] The Fed has aggressively slashed short-term interest rates in recent months to 2.25 percent in a bid to fire up economic momentum, but some analysts say it is now walking a delicate tightrope as further rate cuts could spur increased inflation.[18]

NEW YORK (CNNMoney.com) -- Inflation is the itch that the Federal Reserve just can't seem to scratch. The Fed has slashed interest rates numerous times since last September to try to get the economy out of this severe funk.[5] NEW YORK, April 15 (Reuters) - The dollar edged higher on Tuesday after surprisingly strong inflation and manufacturing data suggested the Federal Reserve may not continue cutting U.S. interest rates quite so aggressively.[10]

Rising raw-material costs are hurting profits as slowing demand makes it difficult for companies to pass increases on to consumers. The need to avert a deeper economic slump will prompt Federal Reserve policy makers to lower the benchmark interest rate again this month even as inflation accelerates.[24]

WASHINGTON (AP) — Inflation at the wholesale level soared in March at nearly triple the rate that had been expected as the costs of energy and food both climbed rapidly.[37]

In line with the global trend of rising prices, the French statistical office INSEE showed the consumer price inflation in the nation rose more than expected in March.[35] No question, PPI inflation is rising, which means consumer prices will increase."[48] How troubling is a 5.4% rise in non-petroleum imports? In search of an answer, consider that inflation generally in the U.S. is climbing by 4.0%, based on the annual rise in consumer prices through February.[51]

With the crude oil price rising to a record close of $113.79 per barrel on Tuesday, analysts said consumers should be braced for more bad inflation news to come.[29] Is that really supposed to soothe consumers? Oil prices hit a new record high Tuesday, as did the prices per gallon of gas and diesel fuel.[5]

In that case, tempering import prices seems inevitable if energy costs merely stay flat, although a drop of oil prices to, say, $80 a barrel would have a huge soothing effect on import price calculations in the near term. Given that this is a presidential election year, the odds for the first one look dim.[51] The "good news," if we can call it that, is that much of the rise in import prices was due to higher energy costs.[51]

The core PPI reading, which strips out volatile food and energy costs, rose a tame 0.2 percent last month and was in line with most forecasts.[18] The core PPI reading, which strips out volatile food and energy costs, rose a much tamer 0.2 percent last month, the government survey revealed.[3]

Energy costs were propelled higher in part by rising diesel and heating oil costs which rose 15.3 percent and 13.1 percent respectively.[3] Energy costs rose 2.9%, led by a 15% increase in diesel and a 13% increase in home heating oil.[48]

Caterpillar Inc., the world's largest maker of bulldozers and excavators, is among companies trying to recoup some of the increases in costs. The Peoria, Illinois-based company said this month it will raise prices as much as 5 percent worldwide in July after steel, copper and crude oil became more expensive.[24]

Energy prices gained sharply, up 2.9 percent in March, compared with an 0.8 percent increase in February.[44] For March, energy prices jumped 2.9 percent, the biggest increase since November.[29]

The hope is that higher food and energy prices haven'''t yet spilled over into the prices of other goods. If you break down the list of those goods, the price increases have been mildest in so-called capital goods ''' business machinery and equipment.[22] Energy prices are expected to provide a modest lift, as should food prices. Over the last year these two components have provided strong upward pressure.[27] The 19% year-over-year rise in energy prices reflects the stronger global demand driven by China, India and other developing countries. Food prices are rising given both global demand and their increased usage as alternative bio-fuels.[27] The United Nations and global policy makers have expressed increased angst about food and energy price spikes in recent weeks.[18]

Rocketing food and energy prices shunted U.S. wholesale prices up sharply by 1.1pc last month.[33] The size of the overall gains are largely tied to non-core food and energy prices seen throughout the world.[16]

Price of consumer goods other than food and energy are up 5.5 percent in the past three months.[22] Food prices rose 1.2 percent, led by increases in vegetables, rice and beef and veal.[24] Food prices, meanwhile, rose by 1.2 percent in March, reflecting advances in the price of vegetables, rice and beef.[25] Food prices leapt 1.2 percent during March after increasing 0.5 percent in February. Prices for a range of foods have increased in recent months, including such staples as wheat, rice and milk.[3]

Prices for intermediate foods and feeds moved up 2.9 percent in March following a 2.3-percent increase in the prior month.[12]

Economists expect the overall PPI to jump 0.5 percent in March and the Core PPI to moderate to a 0.2 percent increase. The New York Fed will release the results of its survey of manufacturers in New York State.[31] Economists surveyed by Bloomberg News had expected the March 2008 PPI index and core rate to increase by 0.5% and 0.2%, respectively.[48]

Economists had expected wholesale costs to increase 0.6 percent in March, so the actual gain was almost double what most analysts had predicted.[3] Excluding food and energy, the increase was 2.7 percent from a year earlier, the most since July 2005. This year, wholesale costs are up 10.2 percent at an annual pace compared with 8.4 percent at the same time last year.[24] Excluding food and energy, the rise was 2.7 per cent year on year. This year, wholesale costs jumped an annualised 10.2 per cent from 8.4 per cent.[47] Wholesale energy costs climbed 2.9 per cent last month and have risen 20 per cent since March last year.[47] Wholesale energy costs climbed 2.9 percent last month and were up 20 percent since March 2007.[24]

Economic pundits were expecting wholesale prices to have shown a gain of only 0.4% in March and were surprised to see how high costs had actually gone.[28] On an annual basis, the pace of wholesale price growth accelerated to 6.9 percent in March from 6.4 percent in February.[1]

By contrast, slightly counteracting the acceleration in the index for total mining, utilities, and manufacturing industries, prices for the transportation equipment industry group fell 0.3 percent in March following a 0.4-percent gain a month earlier.[12] The beef and veal index rose 4.0 percent subsequent to a 0.6-percent gain in February. Prices for shortening and cooking oils and for prepared animal feeds also advanced more than they had in the previous month.[12] Prices received by the petroleum and coal products industry group jumped 13.2 percent after increasing 0.6 percent in the prior month. The indexes for oil and gas extraction and for manufacturers of food, electrical equipment and appliances, and fabricated metal products also rose more than they had in February.[12] The price of gasoline was up 1.3 percent while natural gas rose by 4.2 percent, home heating oil shot up by 13.1 percent and diesel fuel increased by 15.3 percent.[25] While the pace of growth in gasoline and residential natural gas prices slowed compared to the previous month, prices for home heating oil jumped 13.3 percent after falling in the previous month.[1]

Durable manufacturing goods prices rose 3.8 percent, following February's 1.6 percent increase. [44] In addition to price increases for finished goods -- what the headlines numbers refer to -- prices of products earlier in the pipeline and further from consumer hands are rising at a rapid clip. That presages more strong inflation in coming months.[7] This morning the BLS reported that the producer prices of finished goods jumped by 1.1% in March, putting them up by 6.9% over the past year. This was the headline number that freaked everyone out.[49] CPI's core commodity prices are flat from a year ago despite the increased pressure from finished goods PPI and the stronger core intermediate and crude goods prices.[16] "Sounds scary but is consistent with core finished goods prices rising only about 1-3/4 per cent over the next year.[34]

So-called core producer prices that exclude fuel and food rose 0.2 per cent as forecast.[47] Excluding food and energy, intermediate prices rose 1.1 per cent after increasing 0.6 per cent a month ago.[47]

The increase in the PPI was attributed to rising energy and food prices, and was far larger than the expected 0.4% jump.[40] All of which could spell more trouble for consumers in the coming months. Tax filers this week can look forward to some relief from a massive government rebate program. That one-time shot in the arm won'''t help consumers ''' or the economy ''' if energy and food prices keep rising.[22] Even Target and Starbucks are seeing a slowdown. Each of these chains are served by countless small businesses that provide window washing and custodial services, paper products, deliveries, alterations and many other services," he said. The University of Michigan's Institute of Social Research, which conducts a better-known survey of consumer attitudes with Reuters, said more households reported in March that their financial situation had grown worse than at any time since 1991, and more consumers cited high fuel and food prices as the main cause of their financial distress than at any time since 1982.[14]

In the last three months, gasoline prices are up by a third and food prices are up 10 percent.[22] Paul Sakuma / AP In the last three months, gasoline prices are up by a third and food prices are up 10 percent.[22] Food prices rebounded by 1.2 percent after falling 0.5 percent in the previous month.[35]

Prices for intermediate materials less foods and energy moved up 1.1 percent after advancing 0.6 percent in February.[12] Prices for finished consumer foods turned up 1.2 percent after declining 0.5 percent in February.[12] The index for finished consumer foods turned up 1.2 percent in March following a 0.5-percent decrease in February.[12] The index for finished consumer foods increased at a 10.1-percent SAAR for the 3 months ended in March after advancing at a 9.6-percent SAAR for the 3 months ended in December.[12] The index for finished consumer foods increased at a 10.1% rate for the first quarter, faster than in the fourth quarter 2007.[39] The index for intermediate foods and feeds increased at a 39.6-percent SAAR in the first quarter of 2008 after rising at a 20.7-percent SAAR in the final quarter of 2007.[12] During the first quarter of 2008, the index for crude energy materials increased at a 120.7-percent SAAR after advancing at a 129.9-percent SAAR in the fourth quarter of 2007.[12]

The intermediate energy goods index advanced at a 46.4-percent SAAR from December 2007 to March 2008 after moving up at a 50.6-percent SAAR during the final quarter of 2007.[12] The intermediate energy goods index climbed 5.9 percent in March following a 1.1-percent gain in the previous month. Leading this acceleration, the index for diesel fuel surged 15.3 percent after rising 0.9 percent in February.[12] The index for finished goods less foods and energy climbed 0.2 percent after rising 0.5 percent in February.[12]

The index for crude nonfood materials less energy advanced 3.5 percent in March compared with a 3.3-percent rise a month earlier.[12] The index for crude foodstuffs and feedstuffs increased 2.0 percent in March following a 0.7-percent rise in the previous month.[12]

Prices for materials for durable manufacturing increased 3.8 percent in March subsequent to a 1.6-percent rise in the preceding month.[12] Prices for materials and components for construction increased 0.8 percent in March after moving up 0.7 percent in the prior month.[12]

The phosphates index also turned up in March. Prices for inedible fats and oils, paper, and paint materials increased more than they had in February.[12] By contrast, the index for prepared paint decreased 1.5 percent after rising 1.7 percent in February. Prices for semifinished steel mill products and for hot rolled steel bars, plates, and structural shapes increased less than they had a month earlier.[12] By contrast, the flour index increased 6.2 percent following a 15.2-percent climb in the preceding month. Prices for fluid milk products and pork declined more than they had in February.[12]

For the most part, the earnings news since yesterday's close has been better than expected, so there was a modest uptick in the futures market ahead of the Producer Price Index. [50] Why is it useful? Producer price index is a comprehensive index of wholesale price changes which indicates a future change in retail prices.[32]

The November gain in the Producer Price Index was the biggest one-month jump in 33 years.[29]

In 2008, producer prices are increasing at an alarming rate, a 10.2% annual rate, compared to 8.4% for the same period a year ago.[48] For the past 12 months, producer prices have increased 6.9%, and the core rate has risen 2.7%.[48]

I will add a link to the report so you can see for yourself. These are producer prices, as charged by the hospital or doctor. They are not inconsistent with rising premiums if companies are trying to push off more of the cost onto workers.[49] An encouraging earnings report from Johnson&Johnson; lifted spirits south of the border, where markets are shrugging off a hotter-than-expected reading on U.S. producer prices.[4]

The PPI has gotten the most attention after showing a larger-than-expected rise in producer prices.[36]

Prices paid to factories, farmers and other producers were forecast to rise 0.6 percent, according to the median of 71 forecasts in a Bloomberg News survey.[24] The price of new cars dropped by 0.2 percent and the cost of light trucks was down 0.3 percent, indicating the struggles automakers face as a weak economy dampens demand.[29] Farming costs have climbed due to higher fuel prices, which make it more expensive to run tractors and other equipment. There's also an increase in the costs for raw materials such as steel. Cities across the nation are dealing with the food inflation dilemma and it's mostly hitting the poor.[43] A dozen eggs will cost about an arm and a leg. That is the average price of a dozen eggs in 2008, up 42 cents from last year. After nearly two decades of low food inflation, prices for staples such as bread, milk, eggs and flour are rising sharply.[43] The inflation snapshot was released as concern mounts about sharp spikes in global commodity prices which have pushed food costs higher.[3] ''Rapid expansion of ethanol production in the U.S. has diverted supplies of corn from grocery stores to gasoline pumps. Underlying all of these is the rising cost of energy, according to Stuart Hoffman, chief economist at PNC Financial Services Group. '''We'''re seeing global problems on inflation, particularly on the food front in countries where their subsistence level (income) doesn'''t give them any room for leeway.'''[22] 'Food and energy inflation is a significant global problem made worse in the U.S. by the weakness of the dollar,' said Chris Low, Chief Economist for FTN Financial.[1]

Although "there were pipeline pricing pressures evident in today's report that argue for the Fed to let up on the aggressive rate-cutting campaign," said Merrill Lynch economist David Rosenberg, the Fed is nonetheless likely to continue cutting rates. "The inflation hawks on the Fed will likely ratchet up their screeching, and this report doesn't help those who are focusing on the economy," echoed Joel Naroff, head of an economic consulting firm that bears his name. [11] My conclusion from this report is that at least for now, the acceleration of inflation in goods is being damped out by the slow inflation in services. This should not stop the Fed from cutting rates again.[49]

The rate cuts have not substantially helped and more big rate reductions might not either. They may simply lead to a further weakening of the dollar and more inflation. These words shouldn't come as a big surprise since Fisher is the Fed's resident inflation hawk. He voted against the three-quarter point rate cut in March as well as the half-point cut on Jan. 30. (He was not a voting member of the Fed's policy-making committee last year.) Other Fed members who were on board with these big rate cuts are starting to express more worries as well.[5] Headline PPI inflation in the year to March was up 6.9 percent while the core rate was 2.7 percent higher.[3]

The core PPI rate was weighed down in part by a 0.2 percent decline in passenger car prices.[3]

The government will report on consumer prices Wednesday. Analysts said they still expect this report would show a moderate increase of 0.3 percent.[29] Looking ahead, Wednesday's action will be governed by the Consumer Price Index, as well as earnings reports from the likes of Intel (INTC 20.91, +0.22), JPMorganChase (JPM 42.12, +0.62), Coca-Cola (KO 60.94, -0.06), Wells Fargo (WFC 27.81, +0.61) and Washington Mutual (WM).[20] The statistical office ISTAT said the Consumer Price Index, or CPI, rose 0.5% month-on-month, at the same pace registered in the prior month.[35] Analysts are expecting that trend to show up in the Consumer Price Index due out Wednesday.[22] Tomorrow we'll see to what extent there was pass-through to the consumer with the release of the Consumer Price Index, which is the more important market-mover.[50]

The harmonized index of consumer prices climbed 0.8% from the prior month and moved up 3.5% annually.[35]

On a monthly basis, consumer prices rose 0.4% in March, down from 0.7% recorded in the previous month.[35] On a monthly basis, consumer prices climbed 0.4% in March, down from 0.7% recorded in February.[35]

To date the core wholesale price pressures aren't making it up the pipeline to consumer prices.[16] Core commodities prices are flat from a year ago as few of the producer pipeline pressures are being carried over to the consumer. Upward surprises will continue to dampen the equity markets as they argue for the Fed to hold back on the current easing policy cycle.[27]

Consumer responses Most consumers in 16 Mid-Continent states are responding to higher motor fuel prices by driving less, according to Vincent F. Orza, dean of the Meinders School of Business at Oklahoma City University. The school's regular regional consumer sentiment survey also found in March that they were less inclined to buy durable household goods while more believed their financial situation is worse than a year ago, he told an Apr. 9 hearing of the House Small Business Committee's Oversight and Investigation Subcommittee. "At $3/gal, consumer discretionary income declines enough to impact the frequency of eating at quick service and casual theme restaurants, which alone are reported to have lost more than 10% of their customers.[14]

Bond prices ease after the Labor Department says wholesale inflation jumped in March.[23] The inflation relief seen in February was only temporary, says the Labor Department, as home electricity, heating oil and kerosene all increased in March again after the dip.[17]

The cost of goods imported into the U.S. rose a greater-than-forecast 2.8 percent in March, Labor said last week. [24] The New York Fed also said that the percentage of respondents reporting worsening conditions declined markedly to 26 percent in April from 41 percent in March, while the percentage reporting improved conditions rose to 27 percent from 19 percent.[1] The New York Fed's general economic index rose to 0.6 from a March reading of minus 22.2 that was the lowest on record, the bank said today.[24] The New York Fed added that the future general business conditions index fell to 19.6 in April from 25.8 in March.[1]

Readings below zero signal contraction. The New York Fed began its so-called Empire index in 2001.[24]

The recognition that the New York Empire State Index, which is a regional manufacturing report that was released at the same time as the PPI data, was better than expected contributed to the positive bias in the early-going.[20] Tuesday has been a busy day for economic news with data on manufacturing activity in the New York area, weekly same-stores information and the housing market index.[36]

"Bond prices slid in the face of some horrendous inflation data," said Bill Larkin, a portfolio manager at Cabot Money Management. "But the good news is that we have had some strong foreign buying interest and the lackluster performance in stocks are keeping yields high," he added. [23] The inflation measure affects consumers because higher costs for manufacturers are sometimes passed along in the form of price hikes.[46] Passenger car prices dropped 0.2 percent, while the cost of light trucks fell 0.3 percent.[24]

Analysts had expected a much more moderate 0.4 percent rise in wholesale prices for the month.[29] Thomson's IFR Markets had expected overall wholesale inflation to rise 1.8 pct in March, while core inflation was expected to increase 0.3 pct.[2] Core inflation, which excludes energy and food, was more moderate last month, rising just 0.2%, considerably lower than February, when core inflation rose 0.5%.[28] Core inflation rose 0.2 pct for the month, after rising 0.5 pct in February. That left core inflation up 2.7 pct in the past twelve months, the fastest unadjusted annual pace since July 2005.[2]

Briefing.com's outlook for core inflation remains tame given the weaker economic growth that is expected over the coming quarters.[27] On a year-over-year basis, the increase in core inflation was 2.7%, the biggest unadjusted gain since July 2005.[13]

Estimates for core prices ranged from a 0.3 percent decrease to a 0.5 percent increase. [24] The prices for fresh vegetables jumped 15.4 percent, while prices for milled rice, beef, and shortening and oil also showed notable increases.[1] The increase comes as world oil prices touched ta new all-time high of $113.66 a barrel in New York.[33] The airline group wasn't any help, though, as oil prices hitting an all-time high of $114.08 per barrel trumped the news that Delta (DAL 9.16, -1.32) and Northwest (NWA 10.28, -0.94) had agreed to a merger.[20] Oil prices continue to hit new highs Tuesday with crude reaching a price of $113.93.[36] On at least one front - oil prices - the trend seems clear: Crude oil hit a record high this morning of $113.75 a barrel, after an increase of nearly $2 overnight.[30]

"Based on the projections of weak economic growth and record high crude oil and product prices, consumption of liquid fuels and other petroleum products is projected to decline by 90,000 b/d in 2008 (a sharp reversal from the 40,000 b/d increase projected in the previous outlook), then increase by 200,000 b/d in 2009," EIA said. It forecasts that high retail prices and the current economic slowdown will reduce gasoline consumption by 0.4% to 9.4 million b/d during the summer driving season.[14]

"By the time we get to the fourth quarter, if the steel- price increases that people are talking about do come through, it will have a pretty big impact on our material costs,'' Chief Executive Officer Jim Owens said on March 31. Others are having less success. Alcoa Inc., the world's third-largest aluminum company, said this month that first- quarter profit was less than half that earned in the same period last year.[24] Energy prices surged 2.9pc in March, compared with a 0.8pc rise in February.[33] Annual CPI growth in August was just half the current annual rate, but energy prices have shot up since.[27] Spending has been hurt by many things, including credit problems, falling housing prices, a soft jobs market and record energy prices.[36]

Within the energy sector, diesel prices rose 15.3 pct and home heating oil rose 13.1 pct, also the largest gain since November.[2] Energy shares are up 2 percent, with the price of oil spiking higher by more than $2 to a fresh record peak above $113.[4]

"U.S. natural gas prices have been rising for more than seven years while Congress failed to adequately address the domestic energy supply problem.[38] In 1999, U.S. natural gas prices were $2.38 per million BTUs (MMBtu). Today, they are $10.25 per MMBtu.[38]

Residential natural gas prices rose 4.2%, while gasoline prices increased 1.3%.[13] Prices for residential natural gas also rose less than a month earlier," the latest PPI said.[14]

Core prices rose the expected 0.2% to leave 2.7% growth from a year ago -- just below the decade high 2.8% year-over-year in July 2005.[16] World Bank president Robert Zoellick warned over the weekend that a doubling of food prices in the past three years could cause increased poverty and political problems.[3] "Unlike the more widely shared experiences of a quarter century ago, lower income households have reported financial distress due to high fuel and food prices twice as frequently as upper income households," said Richard T. Curtin, who directs the monthly survey.[14] Concerns are rising about price pressures, especially sharp spikes in commodity prices which have stoked world food prices higher.[33]

Everything in this economy seems to slowing--except the prices for energy and food.[9] To the extent that monetary policy can be improved in the months and years ahead, inflationary pressures will fall, or at least stop rising. The fundamental catalysts behind higher prices are immune to central banks, and there's reason to think that these fundamental forces will be harassing the global economy for some time.[51] The Federal Reserve will say enough's enough and pull a Volcker and hike rates. Of course, at this point in the cycle that decision would exacerbate the already weakened economy, although it probably would take the edge off import prices by more than a little. The economy will weaken of its own accord, doing the Fed's dirty work without the political blowback that would arise if the central bank took the lead.[51] The weak dollar and resulting surge in commodity prices have the Federal Reserve concerned. That's why more big rate cuts from the Fed might not be the best way to address the economic weakness.[5]

State Street Corp said profit rose 69 per cent as it added new custody clients while Fed rate cuts increased lending fee income.[47] "The Fed will cut rates again." A separate report showed manufacturing in New York state unexpectedly rose this month as new orders and shipments improved.[47] The report also forecast more gloom for the housing market in the coming months, as a large number of adjustable-rate mortgages will reset to higher rates in May and June, likely increasing the already high numbers of foreclosure. On a brighter note, Tuesday morning, the Federal Reserve Bank of New York released its report on manufacturing activity in the state of New York, showing that activity unexpectedly stabilized in April after deteriorating in February and March.[35]

New figures on consumer inflation will be released tomorrow, a monthly report that is closely watched by the Federal Reserve and other policymakers. Major U.S. markets were trading higher this morning, buoyed by an increase in one measure of manufacturing and a strong profit report from consumer products company Johnson & Johnson.[30] The equity markets will trade negatively off the news but the trading effect will be modest. Higher inflation increases the hesitancy for the Fed to continue its current easing trend for policy rates.[16] If inflation seeps into the broad economy, the Fed's ability to cut rates will be sharply curtailed.[11] For more see. "I guess with the PPI, the report will remove expectations that the Fed will cut 50 basis points at the next meeting even though the the U.S. economy is slowing down," he added. It touched a record high at $1.5912 last week.[10]

In another report, the empire state manufacturing index crushed all expectations and came out at 0.6 positive, while expectations were to see a decline of 17 fol-lowing a decline of 22.2 in March, the number made some optimism in the mar-ket about the manufacturing sector and sure helped in pushing the dollar higher, yet the reading is not that broad and the components inside didn'''t show that the future of the index will be as bright. Eventually; the net long term foreign purchases on the U.S. securities sealed the deal for the dollar strength throughout the day as it reached to 72.5 billion dollars, beating the previous and expected reading, and assuring policy makers that the gap in the trade balance will be covered and that they don'''t have to worry about so much.[21] Later today, we will be watching the empire state manufacturing index to be un-covered to give us a new hint on the manufacturing situation in April, which is expected to come at -18 from a -22.2 reading in March.[15]

A monthly survey by the Center for European Economic Research, or ZEW, found that German economic sentiment dropped to minus 40.7 in April from minus 32 in March., while economists had expected the index to climb to minus 30.[35]

"Wholesale prices are rising and the consumer should expect more shocks at the supermarket and the gas station," said Joel Naroff, chief economist at Naroff Economic Advisors.[29] The steady rise in oil and gas prices will be at the forefront of the presidential campaign Tuesday, when Republican candidate John McCain unveils a package of economic proposals that includes a summertime waiver of the federal gas tax.[30] Prices for jet fuel, residual fuel, liquefied petroleum gas, electric power, and home heating oil turned up in March.[12] Prices for jet fuel, residential fuel, LPG, electric power, and home heating oil turned up in March," it said.[14]

Price advances for wheat slowed to 0.6 percent in March following a 19.2-percent surge a month earlier.[12] The PPI rose 1.1 percent in March, more than double the 0.5 percent rise expected.[36] The 1.1 percent month-over-month upturn in finished goods was roughly double the 0.5 percent rise economists had been anticipating, and it comes on the heels of a 0.3 percent increase in February, and a 1.0 percent increase in January.[11] The increase led to a 1.1% rise in the PPI for finished goods in March following growth of 0.3% in February and 1% in January, BLS said.[14]

Total PPI was up 1.1% in March, but only 0.2% when food and energy are excluded to leave a 2.7% year-over-year increase in what is known as core-PPI.[50] The report showed that the March rise was driven by soaring energy and food costs.[25]

Surging energy costs combined with lower metals prices was one reason for the slowdown.[24] The dire straits of the housing sector don't provide any new information to the equity markets, but an outsized decline will heighten concerns for the near-term economy, which is already struggling under high energy costs, tightened credit, falling confidence and the fear of recession.[27]

The overall jump in the costs faced by businesses and other producers still raises concern about the possibility of inflation twinned with a slowing economy - a "stagflation" that leaves policymakers torn between taking steps to stimulate growth or trying to control rising costs.[30] Some economists say that inflation itself is inoccuous in the macroeconomic sense if it is entirely predictable. It is the introduction of uncertainty into production forecasting that causes inflation to be a drag on output. If this is true, then this might pose a bigger problem for goods than services due to the lead time involved in ramping production and the associated pre-production costs incurred when building additional manufacturing capacity.[49] Costs of intermediate goods used in earlier stages of production increased 2.3 per cent, after edging up 0.8 per cent in February and rising 10.5 per cent from March last year.[47] Producers were paid 6.9 per cent more from March last year, against a 6.4 per cent gain in the 12 months to February.[47]

The median forecast for prices paid to factories, farmers and other producers was for a 0.6 per cent rise, a Bloomberg survey shows.[47] Any rise in prices from the producer's side will raise the prices throughout the channel to the final consumer.[32] Producer prices do not have a necessary connection to the prices consumers pay.[30] "The producer price headline was pretty firm and we did see the dollar move on that," said Ron Simpson, director of FX research at Action Economics in Tampa, Florida.[10]

At the earlier stages of processing, the intermediate goods index moved up at a 19.4% SAAR, and prices for crude goods surged at a 73.4% SAAR after jumping at a 67.7% SAAR for the three months ended in December. [39] Prices for eggs for fresh use also fell in March after advancing in the preceding month, and the index for pork decreased more than in February.[12] Without a steady flow of price data, the index cannot be launched.''' The Sen committee included representatives from the department of industrial promotion and policy, or DIPP, the nodal agency responsible for collecting price data from manufacturers, the Central Statistical Organisation, or CSO, that computes the index, and other government agencies such as the Reserve Bank of India.[45] Getting price data on time from manufacturers is the biggest roadblock in the way of the new PPI, said National Statistical Commission chairman Suresh Tendulkar.[45]

The gain marked the biggest jump in headline PPI since November and occurred as world oil prices continued to strike record peaks.[18] The spike in the PPI was the largest since November and occurred as world oil prices have rocketed to record peaks in recent weeks.[3]

Elsewhere, oil prices settled at a new record high above $113 a barrel as the dollar fell against the euro.[23] The expectation now is that we will hear other carriers announce plans to merge. Incidentally, oil prices are hitting all-time highs this morning. Currently, they are up $1.60 to $113.36 per barrel.[50] A positive quarterly result from Johnson&Johnson; fueled strength at the opening bell, but higher oil prices eventually ate into the gains.[35] The move in oil prices, which flowed from supply concerns, detracted from early buying efforts and led to a broad-based pullback that had each of the major indices in negative territory at mid-day.[20]

Fresh and dry vegetable prices rose 15.4%, while milled rice prices rose 8.7% and cooking oils rose 6.7%.[13] The retail price index, excluding mortgage interest payments rose at a slower pace of 3.5% compared with 3.7% in the prior month.[35] The index for materials for nondurable manufacturing rose 1.5 percent following a 0.9-percent increase in February.[12] By contrast, the index for soaps and synthetic detergents rose 2.0 percent following a 0.1-percent advance in February.[12]

The rise in the index for pharmaceutical preparations slowed to 0.4 percent in March from 1.3 percent in the prior month.[12] The index for fresh and dry vegetables jumped 15.4 percent in March after dropping 15.7 percent in the previous month.[12]

On the housing front, the rate of home foreclosures soared 57 percent in March, according to research from RealtyTrac Inc. released Tuesday. This marks the 27th straight month of year-over year growth, and more bad news is likely on the horizon.[35] The core rate has increased at a 5 percent annual pace compared with 2 percent in the first three months of 2007.[24] Even the core measure is up at an annualized 5 percent through the first quarter.[11] In terms of corporate earnings, investors will be watching for the release of first quarter results from Intel Corp., which could have a profound impact on the technology sector. It is scheduled to release earnings after markets close. Washington Mutual reports its first quarter results, expected to be a loss, also after markets close. Johnson & Johnson, the health care giant, reported upbeat results for its first quarter, with earnings up 40 per cent and ahead of analysts' expectations. The company also raised its forecast for the year.[34] Investors have a lot to digest this morning: The merger of Delta and Northwest airlines and strong earnings from Johnson & Johnson, mostly good news for Wall Street, are being offset by a grim report on wholesale inflation.[7] U.S. crude oil futures rose to new record highs above $113 per barrel. These trends are especially of concern to holders of longer maturity fixed-income securities, which are especially vulnerable to inflation.[13] An interruption in the new era of inflation may be coming, depending on what happens in the global economy. It wouldn't take much on the marginal-demand front to deflate the oil bubble a bit from current levels, which would go a long way in pushing pricing benchmarks down.[51] As for the medium and longer terms, there's reason to wonder if a new era of global inflation has begun, as the new IMF outlook for the world economy suggests.[51]

Plus there were controls on prices and wages that kept the reported rate of inflation down. [51] Non-petroleum import prices are advancing at a roughly 33% faster rate than general inflation.[51]

UK's annual house price inflation slowed to 6.7% in February from 8% in January, the Department of Communities and Local Government, or DCLG, reported Tuesday.[31]

The U.S. Labor Department reported that import prices jumped 2.8% last month. That's the highest since last December's unnerving 3.2% spike.[51] The 1.1 percent gain followed a 0.3 percent increase in the prior month, the Labor Department said today in Washington.[24]

Source: Department of Labor issued on a monthly basis, it goes down in the recession times and up in times of economic boom (parallel with inflation) and it has a high degree of volatility.[32] As seen before, more money in the hands of labor, leads to spending. This causes inflation and finally results to a rise in interest rates. The effect of this figure can be significant if the quarterly figures widely differ from the forecast and it will be a significant market mover. The effect of a rise in this number will point to future hikes in key interest rates which drive the bond markets down and the combination of bond yields.[32] The central bank has been cutting interest rates to combat the current slowdown, but if inflation pressures keep rising, it might be forced to stop cutting interest rates for fear that it would make inflation worse.[29]

The Fed would like to see the core rate fall back below 2.0. Interest rates are higher on this news as it lowers the odds of a larger Fed rate cut at the FOMC meeting the end of April.[36] The effect of Fed operationson all other interest rates is INDIRECT, and varies WIDELY over time, and in MAGNITUDE. The money supply can never be controlled by any attempt to control the cost of credit. An "easy money policy" will bring lower short-term rates in the short run; but, if continued long enough, will bring about higher interest rates, both long & short-term. Higher interest rates consequently are not evidence of '''tight money'''; rather they are the consequence, over time, of an excessively easy (irresponsible) money policy ''' money expansion so great that monetary flows (MVt) substantially exceed the rate of expansion in real output.[51] Fisher said credit problems have made investment banks look like "a Rube Goldberg device designed by a hydrologist on acid, with pipes and conduits that lead every which way and not always toward the goal of sustainable economic growth." (Imagine Ben Bernanke using that metaphor.) For this reason, he added that "even as we have been cutting the fed funds rate, even as we have been opening the monetary spigot, interest rates for private sector borrowers have not fallen correspondingly, and rates for some borrowers have increased.[5]

"We also need to be alert to risks to price stability," said Fed governor Kevin Warsh in a speech in New York Monday. [5] Leading news from the euro zone was the surprising drop in German ZEW Economic Sentiment Indicator due to extraordinarily high price pressure in the country.[35]

The indexes for electric power generation and for beverage and tobacco manufacturers also turned down in March. Prices received by the chemical manufacturing industry group rose less than they had in February.[12] From December 2007 to March 2008, prices for materials for durable manufacturing advanced at a 26.5-percent SAAR after moving down at a 2.3-percent SAAR in the prior quarter.[12] Prices for crude foodstuffs and feedstuffs climbed at a 23.8-percent SAAR for the 3 months ended in March after rising at a 32.5-percent SAAR for the 3 months ended in December.[12]

"Further increases in energy and other commodity prices suggest that the stronger trend will persist at least through midyear," says Smith. [17] Different industries pass through costs in different ways, and in a slowing environment, competition among companies can slow retail price increases.[30] One measure: Less than 20% of private sector workers are employed in goods-producing industries. Here are some examples of industries which the BLS is tracking, and their price increase over the past year.[49] In any case, the 14.8% surge in import prices over the past year falls to 5.4% after stripping out energy.[51]

Higher prices for soap, pet food and pharmaceuticals led the gain in core prices last month.[24] Prices for sanitary paper and health products, alcoholic beverages, civilian aircraft, and pet food also increased less than in February.[12]

Two things are taken into consideration when studying PPI; first, the price of purchasing the raw material for production and second, the demand of the final product.[32] Lavorgna added that core PPI will eventually turn higher due to commodity prices and the weakness of the dollar, which itself is giving further impetus to higher commodity prices.[13] The recent acceleration in the core PPI provides "supportive ammunition for the hawks" at the Federal Reserve, said Northern Trust economist Asha Bangalore. She added, "inflation is a lagging indicator which peaks long after an expansion in economic activity has ended."[11] U.S. economists say the Federal Reserve has been more preoccupied with fighting an economic slowdown and averting a possible recession than taming inflation.[18]

"The pressures are building, though spillover into the consumer level will be quite limited,'' said Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc., a New York forecasting firm.[24] "Cost pressures are building and will continue to build for a few quarters before they recede," Michael Gregory, a senior economist at BMO Capital Markets, said before the report.[47] The surge in energy and food costs is coming just as unemployment is rising and many economists believe the country has fallen into a recession, developments that have taken a toll on President Bush's approval ratings.[29]

The core CPI, which excludes energy, food, alcoholic beverages and tobacco moved up 1.2% annually in March.[35] In March, the core PPI reading was up 0.2 percent from February, in line with forecasts.[11] In February, the overall PPI rose 0.3 percent, while the Core PPI jumped 0.5 percent.[31] Over the past 12 months, the core PPI has risen by 2.7 percent, a level surpassed only twice (in May and July 2005) in the past dozen years.[11]

Economists surveyed by MarketWatch had expected the PPI to rise 0.4% and the core to rise 0.2%.[41] When excluding volatile factors from the index the core reading is expected to climb 0.2% from 0.5% in February, while the core yearly PPI is expected to come at 2.7%.[15]

The Empire State Index, which is the product of a survey of regional manufacturers, showed a surprising 0.6 increase for April versus a negative 22.2 reading in March. The value of this regional report is questionable, but the positive surprise has nonetheless aided in the early action, which suggests the stock market is in store for a higher opening.[50] The report showed that the general business conditions index rose to a positive 0.6 in April from a negative 22.2 in March, with a positive reading indicating growth in the sector.[35] The report showed a deterioration in employment, as the number of employees index fell to 0.0 in April from 4.5 in March.[1] The index came in at 0.6 with a zero reading showing little change from the prior month. Estimates were for this index to show a reading of -16.0 with March's report negative at -22.2.[36]

The turnaround by the sector reflects a rebound in new orders and shipments, with the new orders index rising to a positive 0.1 in April from a negative 4.7 in March while the shipments index jumped to a positive 17.5 from a negative 5.2.[1] The index for materials for nondurable manufacturing advanced at a 19.8-percent SAAR for the 3 months ended March 2008 after climbing at a 21.0-percent SAAR in the previous quarter.[12] The index for materials and components for construction advanced at a 7.9-percent SAAR in the first quarter of 2008 after edging up at a 0.4-percent SAAR in the prior quarter.[12]

The March decline in new car registrations led to a 1.7% year-on-year decline in first quarter.[35]

Policy makers last month were more focused on the threat of a recession than inflation. "Many participants thought some contraction in economic activity in the first half of 2008 now appeared likely,'' minutes of their March 18 meeting showed.[24] Across the Atlantic, UK annual inflation remained stable in March, lingering above the central bank target for the sixth straight month, an official report showed Tuesday.[35] According to the latest report, French annual inflation accelerated to 3.2% in March, higher than 3% predicted.[35]

The futures market held up well in the wake of the PPI data as the in-line number for core-PPI was indeed better than feared. This isn't the most comforting inflation report.[50]

Year over year producer inflation is through the roof at +6.9% with core up +2.7%.[52] The weakening job market (it has never been really strong in the last 7 years but let's not digress. ) is definitely a fsctor in dampening service cost inflation.[49] Sen. McCain said that the government needed to stop supporting economic tariffs for ethanol manufacturing when it was hurting the nation's middle class who were facing soaring food and transportation costs. His comments came while campaigning in Pennsylvania this morning when his staff released the GOP presidential candidate's economic plan. McCain also wants Congress to enact a temporary law that stop taxing gasoline throughout the summer peak driving period, though with Democrats controlling both houses of Congress in an election year, his chances of bipartisan support are thin.[28] Democrats, hoping to win the White House in November, said the string of bad economic statistics showed how Americans were hurting. "As the paychecks of middle class families get smaller and their homes lose value, their wallets are being further emptied by the skyrocketing everyday costs of gas and food," said Sen. Charles Schumer, D-N.Y.[29]

The Associated Press says any increase in food costs sets up an either-or-equation: Give something up to pay for food. For some, that could mean adding an extra cup of water to their soup, watering down their milk or giving their children soda because it's cheaper than milk.[43] A falling dollar increases the cost of the steady stream of imported consumer goods made overseas. As the dollar falls, it takes more of them to buy goods priced in stronger currencies.[22]

On a monthly basis, consumer prices were up 0.8%, faster than the 0.6% forecasted by analysts. [35] The question is how much of the lift is seen in Wednesday's read on consumer prices.[16]

WASHINGTON, DC, Apr. 15 -- There are growing indications that high gasoline and diesel fuel prices are having an increasingly adverse impact on the general U.S. economy, and federal lawmakers have started to respond. [14] The Sen committee has also suggested using the National Sample Survey Organisation, or NSSO, data for 2004-05 but Tendulkar said that any weekly price collection by either NSSO or CSO was problematic as the departments didn'''t have sufficient staff.[45] The housing market index was unchanged in April at 20 with the traffic component also remaining at 19. This news is being viewed positively for the fact it shows some stabilization. This data is getting little attention, especially with the housing starts data due out tomorrow.[36] DIPP, which was using the Mumbai-based think tank Centre for Monitoring Indian Economy, or CMIE, as the data provider for the industrial production index, has not renewed the contract after it expired in 2007.[45]

Economists expect the index to show further contraction in the nation's factory sector though the signs are projected to improve from March, which the index had a reading of negative 22.2.[31] Economists are pleased to see that the falling dollar hasn't yet taken a major toll on demand for U.S. securities. This could change with March's report given the continued weakness found in the dollar.[36]

Producers were paid 6.9 percent more from March 2007, compared with a 6.4 percent gain in the 12 months ended in February. [24] The Redbook report was also much stronger than the year ago period, up 2.0 percent. These gains have to do with the year ago period being Easter, leaving many stores closed on Sunday, obviously lowering sales.[36] The ICSC-UBS same store sales report for the week ending April 12 showed a gain of 1.8 percent compared with the year ago period.[36]

Treasuries dropped after the reports, with 10-year note yields rising to 3.56 percent at 9:45 a.m. in New York, from 3.51 percent late yesterday. [24] A report from the ACEA showed that new passenger car registrations dropped 9.5% year-on-year in March in the total Europe, which refers to EU and EFTA together.[35]

More than half of the acceleration came from the survey's liquefied petroleum gas (LPG) index, which jumped 4.2% in March after dropping 9.7% a month earlier.[14] The index for utility natural gas also rose less than it had in the prior month.[12] The utility natural gas index rose less than it did the previous month, it added.[14]

The S&P;/TSX Composite Index is up 113.21 points at 13,852.09, led by gains among energy stocks. [4]

Benjamin Collins, a spokesman at the''BLS Chicago Regional Office, noted that "a big impact on the finished goods is from energy" and food as well.''[6] U.S. Sens. Maria Cantwell (D-Wash.) and Olympia J. Snowe (R-Me.) urged the Federal Trade Commission on Apr. 8 to use new regulatory authority it received as part of the 2007 Energy Independence and Security Act to prevent oil market manipulation.[14] In the business of chemistry, our energy costs have tripled, from $25.1 billion in 1999 to $72.8 billion in 2007. For our industry and others that compete globally, we cannot simply pass along these higher costs.[38] The rise in food costs also has had an effect on local grocery buyers. 'I try to watch what I buy very closely,' said Sarah Brady, who was walking a basket full of groceries to her car. 'I take my receipts and keep them on the refrigerator and write down every time I go to the store. Brady said she shops at discount stores such as Dollar General and Big Lots to keep costs down. Kerrville resident Barbara J. Sullivan said she looks for quality when buying. 'I try to buy quality and in small amounts,' she said.[43]

According to the minutes of that meeting, released last week, Plosser indicated that the Fed "could not afford to wait until there was clear evidence that inflation expectations were no longer anchored, as by then it would be too late to prevent a further increase in inflation pressures." [5] Because if oil at $113 a barrel isn't "clear evidence that inflation expectations were no longer anchored," I don't know what is. Issue #1 - America's Money: All this week at noon ET, CNN explains how the weakening economy affects you. Full coverage.[5] With the economy slowing and inflation rising, some analysts are concerned the country could be facing another bout of stagflation, the malady that last occurred in the 1970s when economic growth stagnated but inflation kept rising. Such a development would put the Federal Reserve in a bind.[29]

Analysts take some comfort in the fact that the so-called '''core" inflation rate has ''' so far ''' remained in check.[22]

While the index is expected to remain negative in April, it is expected to increase a bit to a minus 16.0. [31] The March data follows increases of 1.0% and 0.3% in January and February respectively.[17] The 1.1 per cent gain followed a 0.3 per cent increase in February, the Department of Labour said yesterday.[47]

Home heating oil shot up by 13.1 percent and diesel fuel, used to power the nation's trucking fleet, increased by 15.3 percent. [29]

SOURCES

1. Wholesale Price Growth Exceeds Estimates Amid Higher Food And Energy Prices [] - RTTNews, Today's Top Stories, Global Newswires, ToDay's Top News,Global Business news .
2. US March PPI up 1.1 pct; core PPI up 0.2 pct at fastest yearly gain since 2005 - Forbes.com
3. AFP: Surging energy, food prices stoke US wholesale costs
4. RTTNews - Financial News Analysis, Coverage Reiterated, Sector/Indices Articles, Stock Market News, Broker Ratings .
5. It's inflation, stupid! - Apr. 15, 2008
6. Increase in Producer Price Index is indicator of inflation
7. Business 101: Producer Price Index - New Jersey Local & Small Business News ' Economics & Finance News Articles - NJ.com
8. The Fed Attempts to Fight Off Inflation - ToTheCenter
9. Producer Prices Surge - Portfolio.com
10. FOREX-Dollar gains on inflation, manufacturing data | Markets | Markets News | Reuters
11. Higher food, energy costs fuel sharp gain in producer prices -- chicagotribune.com
12. Producer Price Index Rises 1.1 in March - Economy
13. Fed Likely To Shrug Off PPI Rise - Forbes.com
14. Impact of higher oil, product prices on US economy deepens - Oil & Gas Journal
15. U.S. Inflation - Forex News | IBT FX Center
16. Briefing.com: Producer Prices Jump, Core Contained
17. Producer price index up 1.1% in March - 4/15/2008 12:17:00 PM - Purchasing
18. AFP: Surging energy, food prices stoke US inflation fears
19. US Producer Prices grow 1.1% in March; Core PPI moderates - Forex News | IBT FX Center
20. Briefing.com: Stocks, PPI and Oil Prices Push Higher
21. PPI Without Energy - Forex News | IBT FX Center
22. Surge in energy prices stokes inflation - Eye on the Economy - MSNBC.com
23. Treasurys dip on inflation report - Apr. 15, 2008
24. Bloomberg.com: Economy
25. U.S. Wholesale Prices up 1.1% in March - HispanicBusiness.com
26. Free Preview - WSJ.com
27. Briefing.com: CPI and Housing Starts
28. Wholesale inflation soars in March, second highest rate in 33 years
29. The Associated Press: Wholesale prices soared in March
30. Free Internet Press :: Jump In U.S. Wholesale Prices Feeds Inflation Concerns
31. RTTNews - Forex News top stories, Forex Trading, European Market Update, Currency Market Update, Forex trading.
32. Producer Price Index - Apr 15 - Forex News | IBT FX Center
33. Food and oil cost America dearly - Telegraph
34. globeandmail.com: Market Blog - Premarket: A new inflation scare?
35. RTTNews - Realtime Economic News, Global Economic News and Reports, Asian Economic News, Economic Calendar.
36. Economic Watchdog, Apr. 15 - Optionetics Commentary
37. The Associated Press: AP Top News at 4:00 p.m. EDT
38. SunHerald.com : Wholesale Prices Rise Sharply in March; Energy Costs Help Drive Increase, With Natural Gas Up 4.2 Percent
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40. Schaeffer's Investment Research - Schaeffer's Daily Market Blog: Breaking Option News, Commentary, & In-depth Analysis
41. U.S. March PPI up 1.1% on higher energy, food costs - MarketWatch
42. www.wbjournal.com - Price Of Production Rises In March
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44. Producer prices up in March - UPI.com
45. Data sourcing holding up new index clearance - livemint
46. On the Watch: Producer Price Index
47. SCMP.com - the online edition of South China Morning Post, Hong Kong's premier English-language newspaper
48. March U.S. producer prices rise more than double forecast on higher oil costs - BloggingStocks
49. Economics Unbound BLS report shows low inflation in services - BusinessWeek
50. Briefing.com: Market and PPI Push Higher
51. Soaring Import Prices Paints a Troubling Picture - Seeking Alpha
52. Stock Futures Ignore Bad Inflation Data

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Its main content has been compiled basing on the fair use of snippets from original news stories (initially clustered by the Google News) by applying our multi-document summarization technology. The title has been excerpted from this article, and the top image was found here.