NEW YORK (CNN/Money) - Wholesale prices posted the largest increase in a year, lifted by higher energy prices, the government reported Thursday, with the overall price measure above Wall Street expectations.
The Producer Price Index was up 0.7 percent in the month, compared to a 0.5 percent increase in March. Analysts surveyed by Briefing.com were forecasting a 0.3 percent increase in the inflation measure.
The so-called "core" PPI, which excludes volatile food and energy prices, was up 0.2 percent, compared with a 0.2 percent rise in March; it was in line with the increase forecast by Briefing.com.
The overall index measures the price of finished goods paid by businesses at the wholesale level. The 0.7 percent hike was the highest since a 1.3 percent increase in March, 2003, when the start of the war in Iraq also sent energy prices sharply higher.
Thursday's report showed energy prices up 1.6 percent in the month, led by gasoline prices, which rose 3.4 percent. Food prices were also a driver, up 1.4 percent in the month.
Concerns about inflation have heightened fears among investors that the Federal Reserve will move to raise interest rates as soon as its next meeting at the end of June.
Even though the "core" PPI was in line with forecasts, the higher-than-expected overall number sent bond prices down and the yield on the 10-year note up to 4.84 percent from 4.82 percent immediately before the report. Major U.S. stock indexes were flat to lower in mid-morning trading.
Little shift seen on report
Economists said the relatively mild rise in the core PPI was a sign of status quo for the markets, not enough to spur a wide shift one way or another.
"People tend to look at core to get a look at overall strength and weakness of the economy," said economist Jay Bryson of Wachovia Securities. But Bryson said that if the high prices for food and energy continue, they won't be ignored by investors and economists.
"If oil prices continue to be at these levels or go higher, and companies feel they can pass some of the price increases on, then it becomes a longer term problem," he said.
The PPI report came the day before the even more closely watched consumer price index, which measures retail prices.
Briefing.com's survey projects a 0.3 percent increase in overall CPI, after a 0.5 percent increase in March, while the core CPI is expected to have risen 0.2 percent after a 0.4 percent increase in March.
"Probably the overall (CPI) number will be somewhat higher than anticipated, but like PPI, the core-number should be close to forecasts," said Sung Won Sohn, the chief economist at Wells Fargo Banks.