US wholesale prices up 0.7 percent, but 'core' prices flat

US wholesale prices increased 0.7 percent in April but the key measure of "core" inflation was flat, the government said Friday.

The producer price index (PPI) was driven by a sharp 3.4 percent jump in energy costs in the month, the Labor Department said. Gasoline prices leapt 8.2 percent, while home heating oil costs rose 4.8 percent in April.

But the core index, excluding food and energy and seen by some as a better gauge of future trends, was flat for a second consecutive month, which should ease some concerns about inflation.

"It's a good inflation showing since it is the core that matters," said Robert Brusca at FAO Economics.

Food prices were another factor pushing up the PPI, increasing 0.4 percent for the month.

The headline figure of 0.7 percent was in line with Wall Street forecasts, but the core PPI was better than the 0.2 percent rise expected.

Producer prices have now risen 3.2 percent over the past year. Core prices, however, have risen 1.5 percent in the past 12 months, a figure likely to ease concerns on inflation at the Federal Reserve.

The central bank's Federal Open Market Committee, in a unanimous decision Wednesday, kept its federal funds interest rate steady at 5.25 percent, where it has been since last June, but said inflation remains a "predominant" concern.

Many economists expect inflation pressures to ease as the economy cools, but some worry about a spillover from surging energy costs.

Easing inflation pressures could allow the Fed to cut interest rates at some point this year to stimulate an economy that has slowed to a sluggish 1.3 percent growth pace in the first quarter of 2007.