The U.S. February producer price index data was the reverse of expectations, showing overall prices to be well behaved but core prices exhibiting disturbing signs of strength.

February PPI printed up 0.1%, and core rose 0.2% for an overall change of a 1.3% decrease over the year and a core change of plus 4.0% over the year. Both are moderating but remain high.

The overall index was lowered by 1.6% in foods as eggs, fruit, dairy, and vegetables fell in price. Energy was up 1.3%, as expected, as gasoline jumped but heating and cooking fuels fell.

Core was boosted by a 1.3% gain in light motor trucks, a 0.5% rise in aircraft, and a host of other factors. Cigarettes printed up 2.7%, and a 1.2% gain was shown for alcohol, a 1.5% increase for women’s apparel, a 0.7% increase for soaps, and a 1.2% rise for newspapers. These show price hikes are holding for small pleasures during the recession.

Communications equipment and furniture fell in price, and computers posted a 4.5% decline, the category’s sharpest drop since a 5.2% decline in January 2005.

Intermediate PPI was down 0.9% and crude fell 4.5%, suggesting little inflation in the pipeline despite the core surprise.

— Market News International

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