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LATEST US DATA

Producer prices up slightly after recent solid gains

Washington

US PRODUCER prices barely rose in April after strong gains in the first quarter, held down by a moderation in the cost of both goods and services, which could ease fears that inflation pressures were rapidly building up.

The Labor Department said on Wednesday that its producer price index for final demand edged up 0.1 per cent last month after increasing 0.3 per cent in March.

That lowered the year-on-year increase in the PPI to 2.6 percent from 3 per cent in March.

Economists polled by Reuters had forecast the PPI gaining 0.2 per cent last month and rising 2.8 per cent from a year ago.

A key gauge of underlying producer price pressures that excludes food, energy and trade services also nudged up 0.1 per cent last month. The so-called core PPI had increased by 0.4 per cent in each of the past three months.

In the 12 months through April, the core PPI rose 2.5 per cent after jumping 2.9 per cent in March.

Last month's slowdown in wholesale price growth is likely temporary as manufacturers have been reporting paying more for raw materials. Core goods prices increased 0.3 per cent in April, matching March's gain.

US financial markets were little moved by the data.

Inflation is flirting with the Federal Reserve's 2 per cent target. The US central bank's preferred inflation measure, the personal consumption expenditures (PCE) price index excluding food and energy, increased 1.9 per cent year-on-year in March and is expected to breach its target in the coming months.

This comes as last year's big declines in prices of cell phone service plans drop out of the calculation.

Fed officials have in recent days signalled they would not be too concerned if inflation overshot the central bank's target, reiterating a message in a statement issued at the end of a two-day policy meeting last Wednesday.

In that statement, policymakers said they expected annual inflation to run close to its "symmetric" 2 per cent target over the medium term. The US central bank left interest rates unchanged last week. The Fed hiked rates in March and has forecast at least two more increases for this year.

In April, the price of services ticked up 0.1 per cent. That followed two straight monthly increases of 0.3 per cent. REUTERS

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