U.S. July PPI, housing starts & building permits

NEW YORK (Reuters) - U.S. wholesale prices took another unexpectedly steep jump in July and shot up at the fastest year-on-year rate in 27 years, according to a government report on Tuesday that was certain to fan fears about a potential surge in inflation.

U.S. home building projects started in July fell 11 percent to the lowest annual rate in more than 17 years, while building permits tumbled 17.7 percent, the Commerce Department reported on Tuesday.

KEY POINTS:

PRODUCER PRICES

* The Labor Department's Producer Price Index, which measures prices at the factory door, climbed 1.2 percent after a 1.8 percent gain in June. But so-called core producer prices, which exclude food and energy, jumped 0.7 percent in July after a 0.2 percent June increase.

* It was the fastest rise in monthly core producer prices since November 2006 and implied that price gains were spreading outside the food and energy sectors, which is certain to concern Federal Reserve policy-makers who want to prevent price pressure from gaining too strong a foothold.

HOUSING STARTS AND BUILDING PERMITS

* The annual pace of housing starts at 965,000 slimly beat Wall Street's expectations of 960,000, but it was the lowest since a 921,000 unit rate in March 1991. In June, housing starts rose 10.4 percent, revised up from the previously reported 9.1 percent.

* Building permits, an indicator of future construction, dropped to an annual rate of 937,000, well below the 970,000 analysts polled by Reuters had forecast. It was the lowest level since March, when they were 932,000, the Commerce Department said.

COMMENTS:

ANNA PIRETTI, SENIOR ECONOMIST, BNP PARIBAS, NEW YORK:

"I would expect going forward that the weakness of domestic demand should contain prices, especially of durable goods. Consumers are not likely to make very large ticket purchases when prospects in the labor market are weakening