Prices paid to U.S. producers rose in February by the most in three months, boosted by higher costs for energy, cigarettes and toys.
By Shobhana Chandra
March 15 (Bloomberg) -- Prices paid to U.S. producers rose in February by the most in three months, boosted by higher costs for energy, cigarettes and toys.
The 1.3 percent gain, which exceeded forecasts, followed a 0.6 percent decline in January, the Labor Department said today in Washington. So-called core prices that exclude fuel and food rose 0.4 percent, double the increase in January.
The figures show stubborn inflationary pressures that Federal Reserve policy makers say pose the biggest risk to the economic expansion. The increase makes it harder for central bankers to lower interest rates even as growth slows and the subprime mortgage market threatens the broader economy.
``We're just not seeing the moderation in inflation pressures to the extent that we'd like to,'' said Gina Martin, an economist at Wachovia Corp. in Charlotte, North Carolina. ``It's certainly not supportive of the Fed easing anytime soon.''
A separate report showed factories are struggling. The Federal Reserve Bank of New York said manufacturing in the state grew this month at the slowest pace since May 2005 as orders and sales weakened. The bank's general economic index dropped more than forecast, to 1.9 in March from 24.4 in February. A number greater than zero signals expansion.
The labor market remains a bright spot for the economy. The Labor Department also reported today that first-time claims for unemployment benefits declined by 12,000 to 318,000 last week, the lowest level in more than a month.
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