Producer Prices Rise More Than Expected, Core Prices Unchanged

Rising energy costs pushed producer prices up by a greater-than-expected 1.0% in March, but producer prices excluding food and energy were flat, a Labor Department report showed on Friday.

Analysts, on average, were expecting a 0.8% gain in overall producer prices and a 0.2% rise in core producer prices.

"Food and energy costs are surging, but if you don't have to eat and drive, life is not that bad," quipped Joel Naroff, president of Naroff Economic Advisors. "This was a pretty good report, if you are a central banker. If you live in the real world, it was not pleasant news."

Recent Producer Price Index Reports (finished goods)

Month	Core	ex. Food & Energy
2006 - Oct	- 1.5%	- 0.4%
2006 - Nov	+ 1.6%	+ 0.9%
2006 - Dec	+ 0.8%	+ 0.1%
2007 - Jan	- 0.6%	+ 0.2%
2007 - Feb	+ 1.3%	+ 0.4%
2007 - Mar	+ 1.0%	+ 0.0%

Overall producer prices rose 3.2% from March a year ago, the biggest year-over-year gain since August.

However, core producer prices rose 1.7% from the same period 12 months ago, down from a 1.8% year-over-year rise for the 12 months ending in February.

Energy prices advanced 3.6% in March after a 3.5% increase in February, the report showed. It was the steepest gain since November.

Food prices were up 1.4% after a 1.9% increase the previous month.

The Federal Reserve has identified inflation as its predominant concern about the U.S. economy. Minutes of the Fed's March meeting released Wednesday showed the central bank is prepared to raise interest rates if necessary to keep inflation at bay.

Trade Gap Narrows Unexpectedly

Meanwhile, a separate government report showed the U.S. trade deficit narrowed unexpectedly in February to $58.4 billion, as crude oil imports fell sharply to the smallest in four years and average imported oil prices were the lowest since December 2005.

Separately, the Commerce Department lowered its estimate of the January trade gap to $58.9 billion, from its previous estimate of $59.1 billion.

The midpoint estimate of Wall Street analysts surveyed before the report was for the February trade gap to widen slightly to $60.0 billion. The smaller-than-expected trade gap could prompt analysts to raise their estimates of first-quarter U.S. economic growth.

The petroleum trade deficit was the smallest since June 2005, as crude oil import volume fell 21% to its lowest since February 2003 and prices dipped to $50.71 per barrel, from $52.23 in January.

Imports from members of the Organization of Petroleum Exporting Countries were $9.9 billion, the lowest since May 2005.

Overall imports fell 1.7% in February to $182.4 billion, led by the drop in petroleum and aided by other categories. However, imports of foods, feeds and beverages rose slightly to a record during the month.

Imports from China fell 10% to $23.1 billion, the lowest since May 2006. The closely watched trade gap with that country narrowed 13.3%, as U.S. exports to China grew 6.1% to $4.6 billion.

Overall U.S. exports retreated 2.2% to $124.0 billion after rising steadily in the six prior months. Exports of U.S. consumer goods slipped from the record set in January, but still were the second-highest ever.

The trade gap with China for the first two months of 2007 was still 25.1% wider than in the same period last year.

© 2009 CNBC.com