US producer prices shot up 1.7 percent last month, the biggest gain in nearly 15 years and well above expectations, as energy costs skyrocketed and food prices surged, a government report showed on Tuesday. Even outside of food and energy, producer prices climbed a relatively swift 0.3 percent in October, the Labour Department said, well ahead of the 0.1 percent gain Wall Street had expected.
The increase in the overall Producer Price Index, a gauge of prices received by farms, factories and refineries, was the largest since January 1990 and easily outstripped expectations for a 0.5 percent gain.
US bond prices fell and stock futures dipped, pointing to a weak market open, as investors turned nervous on inflation. The dollar was little changed.
Analysts said the report buttressed the case for continued interest rate increases from the Federal Reserve, even though a drop in crude oil prices in recent weeks may herald less inflation pressure ahead.
The Fed raised overnight borrowing costs a quarter-percentage point to 2 percent last week and most economists look for a fifth straight rate hike when policymakers gather in mid-December.
Energy prices soared 6.8 percent last month, the steepest climb since February 2003, as gasoline costs shot up 17.3 percent, home heating oil prices rose 17.9 percent and the price for liquefied petroleum gas gained 14.7 percent. Residential electricity costs climbed 2.3 percent.
Food prices increased 1.6 percent, their biggest gain in a year. Vegetable prices rose 34.2 percent, their largest jump in over eight years, and fruit climbed 11.3 percent.
Perhaps more troubling from an inflation perspective, prices outside of food and energy continued a relatively steep march upward in October. Still, the year-on-year gain moved down a notch to 1.8 percent from the 1.9 percent registered in the 12 months through September.
Passenger car prices, which had risen 1.1 percent in September, dropped 1.3 percent last month. But prices for light trucks and SUVs rose a steep 2.7 percent in October on the back of a mild 0.2 percent rise a month earlier.
"It's not just raw materials that are boosting things," said Gary Thayer, chief economist at A.G. Edwards in St. Louis. "We are seeing some increased prices at the core level."
Thayer noted a capital equipment prices rose 0.4 percent for a second consecutive month, which he called "a sign of strength in the economy."
Further back in the production pipeline, prices were mixed. Intermediate goods costs rose 0.9 percent, an acceleration from September's 0.1 percent rise, while crude goods' prices climbed 4.3 percent, reversing a 4.2 percent drop a month earlier.
On the energy price front, some relief could be on the way. Crude oil prices hit a peak above $55 a barrel last month but have come down sharply since then. Crude oil futures settled at $46.87 a barrel in trade in New York on Monday.
Separate reports on Tuesday showed sales at US chain stores up from year-ago levels.
The International Council of Shopping Centers and UBS said sales were up 3.4 percent in the week ended November 13 from a year ago, although they slipped 0.4 percent from the prior week. Redbook Research said sales were 3.7 percent above last year's level and were up 0.2 percent so far in November compared with October.
SEPTEMBER NET CAPITAL INFLOWS TOP FORECASTS: Foreigners' net purchases of US assets proved sufficient to offset the wide current account deficit in September, a report showed on Tuesday, sending a positive signal for the embattled dollar.
Net inflows of capital totalled $63.4 billion in September, after an upwardly revised $59.9 billion in August, the Treasury's International Capital report said.
Within the report, a key factor bolstering foreign purchases of US assets was the record net purchases of US corporate bonds, which soared to $44.60 billion in September, up from $26.51 billion in August.
The current account deficit - the broadest measure of the nation's global trade - lately has been one of the biggest weights on the embattled dollar.
The dollar posted moderate gains in the wake of the asset flows report. The euro slipped to $1.2942, down from around $1.2986. The dollar rose against the yen to 105.59 yen from 105.23 yen shortly prior to the report's release.
Foreign appetite for US government bonds and notes increased in the month. Foreigners bought a net $19.2 billion in September, up from $14.6 billion in August.
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