WASHINGTON (Reuters) - Producer prices rose sharply in February and new claims for jobless aid fell last week, data showed on Thursday, but sluggish factory activity in the Northeast suggested the economy was only limping along.þþThe Labor Department said the Producer Price Index, a gauge of prices received by farms, factories and refineries, rose 1.3 percent last month as energy costs climbed 3.5 percent and food prices moved up 1.9 percent.þþExcluding volatile food and energy costs, the so-called core index advanced 0.4 percent, reflecting steep increases in tobacco and light truck prices.þþU.S. Treasury debt prices were little changed on Thursday and U.S. stock prices ended up slightly while the dollar advanced against the yen.þþ``Today was a double dose of bad news. Weak Manufacturing news and too-high inflation,'' said Allen Sinai of Decision Economics in Boston. ``The economy is growing significantly below potential and core inflation isn't going down.''þþTwo soft reports on March factory activity helped dispel inflation concerns by offering a reminder that the economy was moving forward slowly.þþThe Philadelphia Federal Reserve Bank said its business activity index, which covers the mid-Atlantic region, dipped to 0.2 percent from 0.6 in February. Separately, the New York Fed said its gauge of New York state factory activity fell to its lowest since May 2005. þþJOBLESS CLAIMS DROPþþWhile manufacturing continues to exhibit weakness, the data on initial claims for unemployment insurance benefits issued by the Labor Department suggested the labor market remains relatively firm.þþFirst-time claims fell by a larger than expected 12,000 to 318,000 last week. A more reliable four-week moving average of initial claims dropped by 10,250 to 329,250.þþStill, the number of workers remaining on unemployment benefits rose by 48,000 to 2.576 million for the week ended March 3, the most recent week these data were available.þþEconomists said the big producer price gains and evident health of the job market would likely keep alive concerns at the Fed that inflation might not recede as hoped.þþ``This would signal that there are inflationary issues, which would certainly mean that the Fed is not ready to lower interest rates,'' said Tim Ghriskey, chief investment officer at Solaris Asset Management in Bedford Hills, New York.þþFed officials are widely expected to hold benchmark overnight borrowing costs steady when they meet on Tuesday and Wednesday, but financial markets think the central bank could lower interest rates by mid-year.þþThe producer price numbers came a day before the Labor Department was set to release its closely watched Consumer Price Index for February, which the Fed will examine closely to see if its forecast of slowing inflation on is on track.þþThe February rise in energy prices at the producer level followed a 4.6 percent drop the prior month. Food prices were up 1.9 percent last month after a 1.1 percent gain in January.þþOverall producer prices were up 2.5 percent from the same time a year ago. But core prices were up a more moderate 1.8 percent over the past 12 months, likely easing at least some of the Fed's concerns as they try to manage inflation and keep the economy on a long-term growth path.þþSeparate government data showed international investors bought a net of $97.4 billion in long-term U.S. securities in January, a sign of renewed foreign demand for U.S. assets.þþ
Source: NY Times
