Producer Prices Surged in May

Washington, DC, June 17, 2008--Led by higher energy and food costs, U.S. producer prices rose in May at their fastest pace in six months, according to the Commerce Department.

The core index, which excludes food and energy items, climbed 0.2 percent on the month and 3 percent from one year ago, matching the biggest annual increase since 1991.

Economists had expected a 1 percent increase in the overall index and 0.2 percent core rise.

Recent inflation reports have signaled that higher food and energy prices as well as the weak dollar are putting pressure on prices.

The PPI, as well as last week's price reports, suggests Fed officials will hold rates steady at next week's policymaking meeting for the first time since last August.

But inflation worries have grown in recent weeks as officials have sounded more optimistic that the economy will avoid a severe downturn, a signal that policymakers are shifting their focus to inflation, high oil prices and the weak dollar.

The PPI data showed energy prices up 4.9 percent last month, after falling 0.2 percent in April. Gasoline prices jumped 9.3 percent.

Food prices, meanwhile, were up 0.8 percent in May led by gains in pork and fresh fruit.