US jobless claims and producer prices rise

City A.M. Reporter

Prices paid by US factories picked up pace in March as the disruption caused by Japan's earthquake began to be felt in the auto industry and fuel prices rose strongly.

Another report has also showed a surprise jump in US jobless claims that raised some questions among investors about the health of the labour market recovery, though economists said the number could be a one-off.

Core US producer prices rose slightly faster than expected in March from February and the increase from a year ago was the largest since August 2009.

The Labor Department said its seasonally adjusted index for prices paid at the farm and factory gate – excluding volatile food and energy costs – rose 0.3 per cent after gaining 0.2 per cent in February.

Light trucks prices advanced 0.7 per cent, the biggest rise since July and accounted for a third of the gain in the core PPI. Passenger vehicle prices increased 0.9 per cent, the largest increase since June 2009.

"It looks like the disruption to global autos production stemming from the Japanese disaster will hit autos supply and, consequently could lead to some further steep price increases over the next few months," said Paul Ashworth, chief US economist at Capital economics in Toronto.

In the 12 months to March, the core producer price index rose 1.9 per cent, the biggest increase since August 2009 and speeding up from February's 1.8 per cent rise.

In the 12 months to March, producer prices overall rose 5.8 per cent, the largest gain in a year. The monthly gain slowed to 0.7 per cent, below the one per cent expected by economists.

A second report from the Labor Department showed initial claims for state unemployment benefits rose 27,000 to a seasonally adjusted 412,000, well above economists' expectations for a fall to 380,000.

Economists have noted an increase in claims often at the end of a quarter.

The four-week moving average of unemployment claims – a better measure of underlying trends - climbed 5,500 to 395,750.

The rise in claims interrupted a downward trend that had kept them below the 400,000 threshold for four weeks.