By Lucia Mutikani
WASHINGTON -- U.S. producer prices rose more than expected in June with gains across most categories, pointing to some inflation at the factory gate.
The Labor Department said Wednesday its producer price index for final demand increased 0.4 percent last month, reversing May's 0.2 percent decline.
Economists polled by Reuters had forecast prices received by the nation's farms, factories and refineries rising only 0.2 percent.
The government revamped the PPI series at the start of the year to include services and construction. The new series was viewed as an alternative measure of economy-wide inflation.
But big swings in prices received for trade services, a gauge of margins for retailers and wholesalers, have injected volatility into the series and made it difficult to get a clear read on producer inflation.
The dollar widened its gains against a basket of currencies after the data. U.S. stocks were set to open higher.
Inflation is edging higher, with key consumer price measures rising in both May and April, even though the main gauge watched by the Federal Reserve continues to run below its 2 percent target.
The U.S. central bank is widely expected to start raising interest rates in the second half of 2015, but labor market strength poses the risk of an earlier policy tightening.
Fed Chair Janet Yellen cautioned Tuesday that the Fed could raise interest rates sooner and more rapidly than currently envisioned if the labor market continued to improve faster than anticipated by policymakers.
The Fed, which is moving toward wrapping up its monthly bond buying program, has kept overnight lending rates near zero since December 2008.
In the 12 months through June, producer prices increased 1.9 percent after rising 2 percent in May.
Wholesale food prices slipped 0.2 percent, declining for a second straight month as the cost of grains tumbled by the most since July 2009. Prices for canned, cooked, smoked and prepared poultry recorded their biggest decline since January 2004.
Gasoline prices increased 6.4 percent, the largest gain since September 2012.
Prices received for services at the final demand level rose 0.3 percent after falling 0.2 percent in May.
Producer prices excluding food and energy gained 0.2 percent in June after slipping 0.1 percent in May. In the 12 months through June, the core PPI for final demand rose 1.8 percent, adding to the 2 percent gain in the period through May.
Producer prices excluding food, energy and trade services increased 0.2 percent after being flat the prior month.
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