WASHINGTON -- The prices that U.S. companies receive for their goods and services rose by the most in seven months in April, a sign that inflation may be picking up from very low levels.
The producer price index rose a seasonally adjusted 0.6 percent from March to April, the Labor Department said Wednesday, after a 0.5 percent increase from February to March. April’s increases were led by higher food prices and greater retailer and wholesaler profit margins.
Over the past 12 months, producer prices have risen 2.1 percent, the biggest 12-month gain in more than two years. That figure is roughly in line with the Federal Reserve’s 2 percent inflation target. The producer price index measures price changes before they reach consumers.
Excluding the volatile categories of food, energy and retailer and wholesaler margins, however, the month-to-month increase in April was smaller: Core prices rose 0.3 percent from March.
Ian Shepherdson, chief economist at Pantheon Macroeconomics, noted that the profit margins dropped sharply over the winter before increasing in the past two months, "so we can’t yet say an upward trend is emerging."
Still, the report suggests that inflation may be picking up after coming in below 2 percent for two years. That could reflect better economic health: Higher inflation is generally a sign of rising consumer demand.
Paul Dales, an economist at Capital Economics, noted that a sharp gain in profit margins for machinery and equipment wholesalers drove overall margins higher.