Business

US producer prices see highest jump for two years

  • 17 February 2011
  • From the section Business
Federal Reserve chairman Ben Bernanke
Mr Bernanke said as long as US unemployment remained high recovery would be sluggish

US producer prices saw their biggest rise for two years in January, pushed higher by increasing drug costs.

The core producer price index, which excludes food and energy costs, rose by 0.5%, the biggest gain since October 2008, the Labor Department said.

Analysts had forecast a figure of closer to 0.2%.

Rising producer prices may increase inflationary pressure at a time when US interest rates are low and the economy is trying to emerge from a slowdown.

Governments and central banks across the world are trying to deal with accelerating inflation that is being driven by higher food and commodity prices.

"The question is whether we are seeing a limited pass-through of commodity price hikes or the beginnings of an inflationary spiral," said Nigel Gault, chief US economist at IHS Global Insight.

'Several years'

However, despite their concerns about the increase in producer prices, analysts said that there were a number of other factors helping to keep a lid on inflation.

On Wednesday, separate figures showed that industrial production slipped in January, and signals from the housing sector have been mixed recently.

At the same time, the unemployment rate is proving difficult to bring down.

Last week, the Federal Reserve chairman Ben Bernanke said the US unemployment rate would not return to pre-financial crisis levels for "several years".

US consumer price data will be released on Thursday.

Minutes of the Fed's meeting in late January showed officials expected inflation to stay low and "measures of core inflation would remain close to current levels in coming quarters."

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