By Timothy R. Homan Feb. 18 (Bloomberg) -- Wholesale prices in the U.S. accelerated more than anticipated in January, led by a jump in the costs of energy, light trucks and pharmaceuticals. The 1.4 percent rise in prices paid to factories, farmers and other producers followed a 0.4 percent increase in December, according to figures from the Labor Department in Washington. Excluding food and fuel, so-called core prices rose 0.3 percent, exceeding the median forecast in a Bloomberg News survey. Raw materials costs rose the most in more than three years as factories boosted production to meet demand of a growing global economy. Capacity utilization below its two-decade average and a lack of job growth may limit the ability of suppliers to pass on those costs, allowing the Federal Reserve to keep interest rates near zero to help bolster the economy. “Firms really lack pricing power right now, so it seems really unlikely that these costs will be passed on to the consumer,” said Guy Lebas, chief fixed-income strategist and economist at Janney Montgomery Scott LLC in Philadelphia. “Though demand has picked up since the depths of the recession, consumer spending is still pretty anemic.” Stock-index futures fell after a separate report showed initial jobless claims unexpectedly increased last week. First- time applications for unemployment benefits rose by 31,000 to 473,000, the Labor Department said in a separate release. Economists expected a decline to 438,000, according the median forecast in a Bloomberg survey. Stock-Index Futures Futures on the Standard & Poor’s 500 Index fell 0.4 percent to 1,094.8 at 9:22 a.m. in New York. The 10-year Treasury note rose, pushing down the yield one basis point to 3.72 percent. Economists forecast a 0.8 percent increase in January producer prices, according to the median of 75 projections in a Bloomberg survey. Estimates ranged from gains of 0.2 percent to 1.4 percent. Producer prices rose 1.5 percent in November. Prices excluding food and energy were forecast to rise 0.1 percent after no change a month earlier, according to the survey median. Core prices have increased in two of the last five months. Compared with a month earlier, energy costs jumped 5.1 percent in January, led by higher prices for heating oil and gasoline. The cost of crude oil on the New York Mercantile Exchange averaged $78.40 last month, up from $74.60 in December. The cost of food increased 0.4 percent from December, led by higher meat, poultry and milk prices. Core costs were boosted by more expensive light trucks and pharmaceutical preparations. Prices of trucks rose 1.9 percent and drug costs jumped 1.3 percent, the most since February 2008. Raw Materials Costs Prices at earlier stages of production also increased. Intermediate goods, such as lumber and flour, increased 1.7 percent in January. The cost of raw materials, or crude goods, jumped 9.6 percent, the biggest rise since November 2006. Producer prices are one of three monthly inflation gauges reported by the Labor Department. The cost of imported goods increased 1.4 percent, the Labor Department said yesterday. Figures on consumer prices will be reported tomorrow. Year-over-year costs may keep rising in coming months as the plunge in fuel prices at the depths of the recession in late 2008 and early 2009 drops out of calculations. Fed Chairman Ben S. Bernanke said last week that the central bank expects economic conditions, including “subdued inflation trends,” that may warrant an “exceptionally low” benchmark interest rate “for an extended period.” Fed’s Forecast The central bank’s long-term forecast for its preferred measure of inflation, the Commerce Department’s index tied to consumer spending and excluding food and fuel, calls for gains in a range of 1.5 percent to 2 percent. That gauge, which is typically lower than the CPI, was up 1.5 percent in the 12 months ended in December. Consumers in the Reuters/University of Michigan preliminary survey, released Feb. 12, said they expect an inflation rate of 2.8 percent over the next five years. Those figures are tracked by Fed policy makers. Helping limit inflation is data on capacity utilization. Economists track operating rates to gauge factories’ ability to produce goods with existing resources. The proportion of plants in use rose to 72.6 percent in January, Fed figures showed yesterday. Capacity averaged 80 percent over the past two decades. Lower rates reduce the risk of bottlenecks that can force prices higher. Deere & Co., the world’s largest maker of farm equipment, reported fiscal first-quarter profit yesterday that topped analysts’ estimates and raised its 2010 forecast as the company benefited from lower raw-material costs. “Positive developments based on the world’s prospects for population and economic growth hold great potential and should help our company,” Chief Executive Officer Samuel Allen said in a statement. To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net

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