Producer Price Index Up Unexpectedly for February 2007 - March '07 Rate Cut Unlikely!

The Producer Price Index for Finished Goods advanced 1.3 percent in February, seasonally adjusted, the Bureau of Labor Statistics of the U.S. Department of Labor reported today.  This increase followed a 0.6-percent decline in January and a 0.9-percent rise in December. (READ THE FULL GOVERNMENT REPORT)  This is more than double the industry analysts estimates of a 0.6% increase.

Core PPI likewise increased by 0.4%, double analysts expectations of a 0.2% increase.

The Consumer Price Index (CPI) index report for February 2007 will be released tomorrow, March 16th.

This news coming on the door-step of the Fed's March 21st FOMC meeting makes the likelihood of a cut in the Fed Funds Rate this month very, very remote.  Market analysts are still predicting a rate cut from 5.25% to 5.0% in August '07.

PPI REPORT HIGHLIGHTS

The finished  energy goods index climbed 3.5 percent in February after falling 4.6 percent in the preceding month.

Gasoline prices rose 5.3 percent following a 13.0-percent drop in January. 

The indexes for residential natural gas, liquefied petroleum gas, home heating oil, diesel fuel, and kerosene also turned up in February.  Prices for residential electric power increased more than they had a month earlier.

Prices for finished consumer foods advanced 1.9 percent in February following a 1.1-percent gain in the previous month. 

Leading this acceleration, the fresh fruits and melons index jumped 15.7 percent after decreasing 13.4 percent in January.

Prices for fresh and dry vegetables also turned up in February following declines a month earlier.

The indexes for pork, beef and veal, and confectionery end products rose more in February than they had in the preceding month. 

Alternatively, prices for finfish and shellfish moved up 0.3 percent in February after climbing 8.1 percent in the prior month.  

The index for processed young chickens also rose less than it had in January. 

Prices for processed fruits and vegetables turned down in February after increasing a month earlier, and . . . the index for soft drinks fell more than in January.