[WASHINGTON] US producer prices rose in March after four straight months of declines and there were signs of some firming in underlying inflation, which should keep the Federal Reserve on course to start raising interest rates this year.

The Labor Department said on Tuesday its producer price index for final demand increased 0.2 per cent last month, with rising prices for goods accounting for more than half of the jump.

The PPI had declined 0.5 per cent in February as profit margins in the services sector, especially gasoline stations, were squeezed, and transportation and warehousing costs fell.

In the 12 months through March, producer prices fell 0.8 per cent, the biggest year-on-year decline since the revamped series started in 2009, after sliding 0.6 per cent in February.

Economists had forecast the PPI rising 0.2 per cent last month and falling 0.8 per cent from a year ago.

While energy prices have stabilized, a strong dollar and weak global demand are likely to keep inflation subdued for a while.

Low inflation and signs of a sharp slowdown in economic growth in the first quarter have prompted most economists to push back their expectations for the first Fed rate hike to either September or October from June.

The Fed, which has a 2 per cent inflation target, has kept its key short-term interest rate near zero since December 2008.

Energy prices, which had been a drag on producer inflation in recent months, jumped 1.5 per cent in March after being unchanged in February. Wholesale food prices fell 0.8 per cent, declining for a third straight month.

The volatile trade services component, which mostly reflects profit margins at retailers and wholesalers, slipped 0.2 per cent last month after a record 1.5 per cent decline in February.

Transportation and warehousing services fell 0.2 per cent, dropping for a fourth straight month.

A key measure of underlying producer price pressures that excludes food, energy and trade services rose 0.2 per cent after being unchanged in February.

REUTERS