UPDATED -- Prices at the wholesale level increased 0.5% in March, the biggest hike since June, according to a new U.S. Labor Department report.
The increase follows a 0.1% drop February and is more than a consensus forecast of economists were expecting.
Over the past year, the Producer Price Index has increased 1.4%.
Much of the March gain was due to increases in clothing, jewelry and food prices. Also the wholesale cost of services surged 0.7%, the biggest increase in more than three years. Excluding food and energy, the core PPI rose 0.6%, the largest monthly increase since March 2011.
“This morning's inflation report to some degree lessens fears that price pressures are not on course to return to the Federal Reserve’s inflation target of 2%,” said Lindsey Piegza, chief economist for the investment firm Sterne Agee. “Even with this morning's outsized rise, overall inflation pressures remain benign and coupled with a lackluster labor market further justify the Fed's commitment to accommodation.”
This is the third PPI report toting the new expanded index that measures 75% of the economy, compared to about a third for the old metric, which compiled the costs of goods but excluded services.
A separate report also released Friday shows consumer confidence in the U.S. this month hit its highest level since last July.
The Thomson Reuters/University of Michigan preliminary index of sentiment climbed to 82.6 after hitting a four-month low of 80 in March.
The index's measure of how consumers view current conditions rose to 97.1 from 95.7 in March while the gauge of consumer expectations regarding future conditions jumped to 73.3, the highest since August, from 70 last month.
Update adds consumer sentiment index.