Producer Prices Rise; Housing Starts Drop

WASHINGTON — U.S. core producer prices barely budged last month and housing starts dropped, easing inflation concerns, but a strong gain in industrial output suggested that price risks have yet to fully recede.

The Labor Department said Tuesday that the overall producer price index rose to 160.5 in April, a steep increase of 0.9%, but prices outside the volatile food and energy areas rose just 0.1% for the second straight month.

The Commerce Department said housing starts fell 7.4% in April to a 1.849-million-unit annual pace. It was the third straight monthly drop.

But in a sign of vigor, a Federal Reserve report indicated that industrial output rose by a greater-than-expected 0.8% in April, pushing the percentage of industrial capacity employed to its highest since July 2000.

The gain in the overall producer price index, a gauge of prices received by farms, factories and refineries, was the largest since September. It reflected a 4% rise in energy prices, which hit a record high last month. Gasoline prices shot up 12.3%.

The core index gain, however, indicated that energy-related price pressures have yet to translate to big price hikes for most goods. Although overall producer prices have risen 4% over the last 12 months, core prices are up just 1.5%.

Groundbreaking for single-family and multifamily homes fell in April, according to the Commerce Department. Permits for groundbreaking, an indicator of builder confidence, dropped 5.4%, the biggest decline in nearly two years.

The pickup in output at factories, mines and utilities pushed the industrial capacity use rate up to 81.9%, the highest in more than 5 1/2 years.