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SUMMARY-Wholesale inflation accelerates in March in the US with a generalized price increase

By Lucia Mutikani

WASHINGTON, Apr 9 (Reuters) – Producer prices in the United States rose more than expected in March, resulting in their biggest annual rise in nine and a half years, likely ushering in higher inflation amid improved public health environment and massive government backing.

Friday’s Labor Department report also showed strong gains in underlying producer prices last month. That lined up with business polls showing mounting cost pressures as strengthening domestic demand moves against supply constraints.

Federal Reserve Chairman Jerome Powell reiterated Thursday that he believes the expected rise in inflation will be temporary and that supply chains will adapt and become more efficient. Most economists agree, citing considerable slack in the labor market.

“Beyond the temporary effects, inflation is unlikely to continue accelerating given the large slack in the labor market,” said Rubeela Farooqi, chief US economist at High Frequency Economics in White Plains, New York.

The producer price index (PPI) for final demand jumped 1.0% last month after rising 0.5% in February. In the 12 months to March, the PPI increased 4.2%, the highest year-on-year increase since September 2011 and after the 2.8% rise in February.

The year-on-year PPI increased as weak readings from last spring were removed from the calculation. Prices fell early in the pandemic amid mandatory non-essential business closings in many states to stem the first wave of COVID-19 cases.

Economists polled by Reuters projected that the PPI would gain 0.5% last month, up 3.8% year-on-year.

The prices of goods grew 1.7%, which represents almost 60% of the increase in the PPI last month. That was the biggest increase since December 2009 and followed a 1.4% rise in February. Prices for services increased 0.7% after gaining 0.1% in February.

Excluding the volatile components of food, energy and commercial services, producer prices increased 0.6%. The so-called underlying PPI gained 0.2% in February. In the 12 months to March, the underlying PPI accelerated 3.1%, the largest increase since September 2018, after a rise of 2.2% in February.

(Report by Lucia Mutikani, Edited in Spanish by Janisse Huambachano and Manuel Farías)

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