U.S. Producer Prices Surge More Than Forecast in July

Prices paid to U.S. producers in July rose twice as much as economists projected and increased the most in 27 years from a year earlier, as companies faced escalating energy costs.

The 1.2 percent increase in the producer price index followed a 1.8 percent jump the prior month, the Labor Department said today in Washington. So-called core producer prices that exclude fuel and food increased 0.7 percent, compared with a 0.2 percent gain in June.

The surge last month reflected energy prices that have since declined, an indication that July may represent the peak in inflation, economists said. Still, increases in core products may put pressure on the Federal Reserve to raise interest rates.

``It's not a pretty number,'' said Stuart Hoffman, chief economist at PNC Financial Services Group Inc. in Pittsburgh. ``Today's PPI is a bit of an echo and maybe a little bit of a rude reminder of how much of a problem inflation was in July. Immediately ahead, I think we'll see some more pass-through in the core numbers.''

Another government report showed builders in the U.S. broke ground in July on the fewest houses in 17 years, signaling the residential-construction slump will continue to hurt economic growth.