Energy, services fuel jump in U.S. producer prices

By Jason Lange

WASHINGTON (Reuters) - U.S. producer prices rose more than expected in October and at their fastest pace in six years but measures of underlying price pressure cooled, bolstering the view that the U.S. central bank is not facing a resurgence in inflation.

Other data on Friday suggested U.S. consumers polled this month expected less inflation over the next year compared to their expectations a month earlier.

Prices paid by producers rose 0.6 percent in October, the biggest gain since September 2012, with much of the increase fueled by a jump in costs for energy and trade services, according to figures published by the U.S. Labor Department.

Analysts polled by Reuters had expected producer prices to rise 0.2 percent from September.

But for a core measure of producer price pressures, cost gains slowed, the data showed. Producer prices outside food, energy and trade services rose 0.2 percent in October, down from a 0.4 percent gain in September. Compared to a year earlier, these core prices were up 2.8 percent, compared to 2.9 percent in the 12 months through September.

U.S. stocks opened lower as a batch of weak Chinese data raised concerns about global growth. Yields on U.S. government debt, however, fell.

The Federal Reserve left interest rates unchanged on Thursday and said it remained on track to continue raising borrowing costs gradually. It is widely expected to raise rates in December.

The U.S. central bank has been slowly hiking interest rates since 2015 to keep inflation under control. The Fed seeks to keep prices for consumers rising 2 percent annually and monitors producer prices for signs that inflationary prices might be building.

In October, those inflationary pressures appeared strongest in relatively volatile goods and services. Producer prices for trade services, which include costs for retailing and wholesaling merchandise, rose 1.6 percent, the biggest gain since October 2014. Costs surged 2.7 percent for energy, the fastest increase in five months.

U.S. consumers surveyed in November expect prices to rise 2.8 percent over the next year, according to the University of Michigan's survey of consumer sentiment. That's down from an expectation of 2.9 percent in the university's October survey. Over the next five years, however, inflation expectations rose slightly.

U.S. consumer sentiment has been on an upward trend since 2015, although the University of Michigan's November survey showed a slight cooling from October.

A separate report from the Commerce Department showed wholesale inventories rose 0.4 percent in September, slightly faster than its initial estimate of a 0.3 percent increase.

With U.S. job and wage growth bolstering domestic demand, businesses are expected to boost stocks of goods, which could underpin production at factories.

Inventories other than autos, a measure that goes into the calculation of gross domestic product growth, rose 0.2 percent in September.

(Reporting by Jason Lange; Editing by Andrea Ricci)