Producer Prices in US Rise above Forecasts.

US produces had a marked increase in prices last month as higher gas and energy bills as well as higher food prices threaten to fuel inflation as the1.1 percent increase follows on from February’s 0.3 percent gain.

The core producer prices that do not include fuel and food still increased by 0.2 though this gain was true to the forecast, as estimates range from a 0.2 to 0.5 percent increase.

The slowdown n demand coupled wit the rise in the cost of raw materials are making dents in profits making it hard for companies to cool prices.

Even though inflation is increasing Fed policy makers are likely to reduce the benchmark interest rate for the second consecutive month.

From the first quarter, wholesale costs are up 10.2 percent compared to 2007.

Food prices increased by 1.2 percent, and the 8.7 percent gain in rice is the biggest change for 6 years.

Energy costs also faired baby as domestic heating costs were up 13 percent while wholesale costs were up 2.9 percent in March, a 20 percent increase from March 2007.

Wholesale energy costs climbed 2.9 percent last month and were up 20 percent since March 2007. Diesel fuel rose 15 percent and home heating oil was up 13 percent.

A separate report released today did however express some optimism as the New York state manufacturing increased unexpectedly this month as new orders and shipments boosted production.

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