Upon the impact of Japan’s earthquake, U.S. auto factories’ expenses went up as fuel prices hiked. Jobless claims have surprisingly gone up too; that casted doubts and shadows on investors regarding labor sector recovery. Farm and factory industry seasonally adjusted price index minus volatile food and energy costs went 0.3% higher after February’s 0.2%. Concerns over global economy inflation threats and the new unemployment claims rise pressured U.S. stock prices.
Since July, the biggest rise in light truck prices occurred as they were 0.7% up which was 1/3 of the core PPI gain. Public vehicle prices were up by 0.9%, the largest since June 2009. Economist Paul Ashworth said looks like global auto production disruption due to the Japanese disaster will hit auto supplies and, could lead to further price increases over the next few months. Vehicle discounts were removed by suppliers who were fearing shutdowns due to early inventory depletion, said economist Brian Bethune.
Core producer price index saw its biggest increase at 1.9% in the 12 months to March while total producer prices rose 5.8%. Monthly gains went 0.7% slower and less than the 1.0% expected by economists. Gasoline prices jumped 31.2% reflecting a global economy recovery amid concerns caused by unrest in the Middle East and North Africa. While inflation pressure mounted because of rising gasoline prices, although the Federal Reserve sees it as temporary. They pledged to take action to ascertain no inflation psychology takes place.
On the rising price pressures, some U.S. economy readings reflected signs of weakness. A global survey of economists showed the U.S. economy may gain 2.5% in the 1st quarter from 3.5% a month ago. Growth is seen at 2.9% for 2011, below previous forecast of 3.1%. On Wednesday, the U.S. central bank’s Beige Book that summarizes economic conditions reflected higher commodity costs reported by businesses to have pushed up prices. In the weak market, producers try to pass higher costs to consumers.
A report from the Labor Department showed initial state jobless benefit claims increased to 27,000 to a seasonally adjusted 412,000. Economists’ expectation was 380,000. Economist Ian Shepherdson said given the underlying downward trend, it may be seen as a one-time fluke, though a clear reversal next week is better. Economists observed that often, towards the end of a quarter, an increase in claims happens.
Unemployment claims of a 4-week moving average were at 395,750 (5,500 up). The increase halted a downward leaning towards the 400,000 threshold for 4 weeks, a level that normally means job growth. The 4-week average stayed lower than the 400,000 mark for 7 weeks in a row even if there was a rise in the past week. Energy prices (up by 2.6%) were almost 90% of wholesale price increase in March. Energy prices were 3.3% higher in February. Gasoline prices went up by 5.7% after February’s 3.7% rise. A 0.2% dip was experienced by food prices, the first since August.