(Adds consumer confidence, analyst comments; updates markets)
* Producer prices rise 0.5 percent, largest gain since June
* Core PPI up 0.6 percent, biggest rise in three years
* Consumer sentiment hits nine-month high in April
WASHINGTON, April 11 (Reuters) - U.S. producer prices recorded their largest increase in nine months in March as the cost of food and trade services surged, pointing to some pockets of inflation at the factory gate.
Other data on Friday showed consumer sentiment hit a nine-month high in April, strengthening views economic activity was regaining momentum after a weather-induced lull early this year.
The Labor Department said its seasonally adjusted producer price index for final demand increased 0.5 percent last month, the largest increase since June last year, after slipping 0.1 percent in February.
Economists, who has expected prices received by the nation's farms, factories and refineries to gain only 0.1 percent, were puzzled by the increase last month.
The government has revamped the PPI series to include services and construction. The series' short history makes it difficult to gauge a trend.
"It could be that the difficult weather over the past few months has distorted prices, and wholesale inflation will settle down in April," said Gus Faucher, a senior economist at PNC Financial Services in Pittsburgh.
"But there is also the possibility that inflation may be picking up, as firms raise prices given the recent limited acceleration in wage growth and stronger demand."
Producer prices excluding volatile food and energy costs rose 0.6 percent, the biggest rise since March 2011. The so-called core PPI for final demand had declined 0.2 percent in February.
The broader PPI will over time track closely the Consumer Price Index. Inflation has been running very low, allowing the Federal Reserve to maintain its expansionary monetary policy to nurse the economy.
A separate report showed the Thomson Reuters/University of Michigan's consumer sentiment index rose to 82.6 in early April, the highest since July, from 80.0 in March.
"We suspect that improving weather conditions and a more optimistic outlook on the economy and labor markets contributed to the rebound in consumer optimism," said Gennadiy Goldberg an economist at TD Securities in New York.
U.S. financial markets were little moved by the data.
PORK, SAUSAGE PRICES SOAR
Last month, food prices jumped 1.1 percent, the largest increase since May, after rising 0.6 percent in February.
Food prices were pushed up by a surge in the cost of pork, which saw its largest rise since August 2008. Sausage, deli meat and boxed meat prices rose by the most since August 1980.
Food prices have now risen for a third straight month, in part reflecting a drought in the West.
Services for final demand spiked 0.7 percent, the largest gain since January 2010, after falling 0.3 percent in February.
In the 12 months through March, producer prices advanced 1.4 percent. That was the largest increase in seven months and followed a 0.9 percent rise in February.
Another gauge of core producer prices - final demand less foods, energy, and trade services - rose 0.3 percent after ticking up 0.1 percent.
In the 12 months through March, core PPI for final demand rose 1.4 percent after increasing 1.1 percent in February.
(Reporting by Lucia Mutikani; Additional reporting by Richard Leong in New York; Editing by Andrea Ricci and Meredith Mazzilli)