Producer prices in the U.S. unexpectedly increased in the month of October, according to a report released by the Labor Department on Tuesday, with prices for services and food leading the way higher.
The Labor Department said its producer price index for final demand rose by 0.2 percent in October after edging down by 0.1 percent in September.
The modest increase in prices came as a surprise to economists, who had expected the index to dip by another 0.1 percent.
A rebound in prices for services contributed to the unexpected increase by the headline index, with the index for final demand services climbing by 0.5 percent in October after slipping by 0.1 percent in the previous month.
The increase in service prices, the largest since July of 2013, reflected a 1.5 percent jump in margins for trade services. The trade indexes measure changes in margins received by wholesalers and retailers.
Margins for fuels and lubricants retailing surged up by 26.1 percent amid the recent plunge in wholesale gasoline prices.
The report also showed a notable rebound in food prices, which rose by 1.0 percent in October after falling by 0.7 percent in September.
On the other hand, energy prices extended their recent decline, plunging by 3.0 percent in October following a 0.7 percent drop in the previous month.
Excluding food and energy prices, the core producer price index climbed by 0.4 percent in October after coming in unchanged in September. Core prices were expected to inch up by 0.1 percent.
Despite the monthly increase by the producer price index, the annual rate of growth slowed to 1.5 percent in October from 1.6 percent in September. The increase reflected the slowest growth since February.
Meanwhile, core producer price growth unexpectedly accelerated to an annual rate of 1.8 percent in October from 1.6 percent in September.
Paul Dales, Senior U.S. Economist at Capital Economics, said, "We suspect that the bulk of the larger-than-expected rise in U.S. producer prices in October is due to a statistical quirk related to the effects of the lower gasoline price."
"Nonetheless, the stronger economy should still put upward pressure on core PPI inflation over the next year," he added.
Thursday morning, the Labor Department is scheduled to release a separate report on consumer price inflation in the month of October.
Economists currently expect consumer prices to edge down by 0.1 percent, while core consumer prices are expected to tick up by 0.1 percent.
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