12 May 2011 15:31 [Source: ICIS news]
WASHINGTON (ICIS)--US wholesale prices for organic chemicals and plastic resins rose by more than 2% in April, the Department of Commerce (DOC) said on Thursday, part of an overall 0.8% gain in producer prices that was chiefly led by higher fuel costs.
In its monthly report, the department said that the 0.8% gain producer prices (also known as wholesale prices) last month followed a 0.7% rise in March, a revised 1.6% bump in February and January’s sharp 2.8% advance.
In each of those months, the gain in the department’s closely watched producer price index (PPI) was driven almost entirely by even sharper increases in energy products, especially gasoline.
The April PPI advance of 0.8% continued that pattern, with the department noting that three-quarters of the gain was attributed to a 2.5% jump in energy products, including a 3.6% one-month increase in gasoline prices at the wholesale level.
At the retail level, US gasoline prices have been gaining steadily since late last year and now stand at or above $4/gal across much of the country.
Economists say that the $4/gal level is the price “pain point” that begins to influence consumer behaviour and spending, and that further advances in the retail price of gasoline and diesel fuels could begin to undermine the nation’s already wobbly recovery.
The sharp April gain in gasoline wholesale prices indicated that prices at the pump were likely to increase further.
When data on energy and food products are removed from the overall producer prices figures, the department said that its so-called core index for wholesale prices rose by only 0.3% in April.
The core index is viewed as a more reliable indicator of potential pricing pressure at the downstream retail stage because fuel and food prices often fluctuate widely at the producer level.
In organic chemicals, the department said that wholesale prices rose by 2.2% in April and followed a 0.3% advance in March and February’s sharp gain of 4.1%.
Producer prices for plastic resins and materials rose by 2.6% in April, the department said, and followed much more modest gains of 0.8% in March and 0.5% in February.
The department said that with the April advance, the producer price index has seen increases in the last 10 months on a seasonally adjusted basis.
These price gains at the wholesale level have raised concern among economists, who worry that resulting increasing price pressure at the retail level could force the Federal Reserve Board to begin raising interest rates in order to forestall an inflationary run.
A boost in the Fed’s interest rates would in turn further slow the economic recovery.
($1 = €0.68)
Paul Hodges studies key influencers shaping the chemical industry in Chemicals and the Economy
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