Shock jump in US producer prices

According to the latest Labor Department figures, prices climbed by 1.3% in February compared to last year. In January, prices dipped by 0.6%.

The driving force behind the increase was a surge in the cost of food, energy and toys, the Department said.

The figures underline fears that US inflationary pressures are still strong and will need further interest rate rises to bring them under control.

Housing concern

Separately, ex-Federal Reserve head Alan Greenspan has said there is not yet any evidence that the slowing US housing market has negatively impacted on the wider economy.

Mr Greenspan, who caused alarm last month when he said the possibility of the economy moving into recession later this year was not out of the question, said consumer demand was still strong despite a fall-off in housing activity.

"A spillover may still happen but boy it's hard to find any such evidence," he said in a speech in Florida.

"The Fed is not cutting anything if this is the type of inflation we are seeing"
Robert MacIntosh, Eaton Vance Management

At present, the US interest rates stand at 5.25%, and some economists had been calling for a rate cut amid fears that the world's largest economy may be slowing and the belief that inflation was under control.

But now concerns are mounting that the US Federal Reserve may increase the cost of borrowing at its meeting next week, especially as consumer prices have also been climbing.

"The Fed is not cutting anything if this is the type of inflation we are seeing." said Robert MacIntosh, chief economist at Eaton Vance Management in Boston.

Last month, producer prices increased by their quickest rate since November.

When not including the more volatile food and energy costs, producer prices climbed by 0.4%, also more than forecast by market analysts.

Toy prices increased by 2.3%, the quickest gain since February 1983.

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