Producer prices up on energy rise in May

By Joanne Morrison

WASHINGTON (Reuters) - A big jump in energy costs sharply pushed up prices that U.S. manufacturers and wholesalers paid for goods last month, but outside of energy the inflation picture looked tame.

Producer prices rose by 0.9 percent in May, the Labor Department said. But excluding volatile food and energy items, U.S. manufacturers and wholesalers saw a much more moderate 0.2 percent rise in prices.

Energy prices rose 4.1 percent, the biggest gain in six months, as gasoline prices climbed 10.2 percent, their largest increase since November. Food prices, however, slid 0.2 percent, the first drop since October.

"I think energy is going to dominate this story," said James Glassman, economist at JP Morgan in New York, adding that overall the U.S. inflation picture was stable and that a still-tight job market was unlikely to disturb that view.

"Labor costs are not a threat and why would they be if corporate profit margins are at record highs?" Glassman said.

Separate Labor Department data out on Thursday underscored the stability in the labor market even as the economy has sputtered over the last couple of quarters.

The department said the number of workers signing up for first-time jobless benefits last week was unchanged, holding at a range seen for the past several weeks.

"Jobless claims appear to be settling in around the 311,000 area, a level that has been historically consistent with fairly solid job creation," Bear Stearns economists wrote in a report after release of the data.