Rising Services Costs Help Drive U.S. Business Prices Higher

WASHINGTON—A gauge of U.S. business prices rose broadly in February, the second month of solid growth, signaling modest inflation pressure is building.

The producer-price index, a measure of the prices businesses charge for their goods and services, increased 0.2% in February from a month earlier, the Labor Department said Wednesday. The measure increased 2.8% from the prior year.

The underlying slices of the PPI index are showing broad growth too. Prices rose a seasonally adjusted 2.7% in February from a year earlier, when excluding the more volatile food, energy and trade services categories. This is the largest annual gain since August 2014, the Labor Department said. The measure grew 0.4% on the month.

Prices for services largely drove last month’s business price growth. Services for final demand increased 2.8% in February from the prior year, the heftiest increase in about eight years.

Sizable “monthly advances were posted by trucking, airfares, banking and investment services, realtor fees, legal services, architectural and engineering services, and hotels…the full array of anecdotal, survey and statistical evidence does suggest that inflation is beginning to creep higher, led by services,”

Stephen Stanley,

chief economist at

Amherst Pierpont Securities

said in a note to clients Wednesday morning.

Economists had expected a smaller 0.1% one-month increase in overall prices and a 0.2% rise for prices excluding food, energy and trade services.

February’s solid business price increases came on the heels of broad increases in January, suggesting businesses may soon need to raise price tags to compensate for heightened input costs.

The producer prices measure tracks the same trends as other broad inflation gauges, though it doesn’t always translate into what consumers pay. Signs of possible building inflation pressures have emerged in multiple recent reports. In February, the consumer-price index rose 0.2% from a month earlier, easing from a 0.5% gain in January, and was up 2.2% on the year. The Federal Reserve’s most recent beige book said prices increased across the U.S. at a “moderate pace,” after months of some districts reporting less robust “modest” price growth.

Ramped-up inflation could cause the Fed to pick up the pace of interest rate increases this year. Fed officials in December penciled in three increases for 2018, but recent strong economic performance reports have raised the specter of more.

Federal Reserve Bank of Boston President

Eric Rosengren

recently said he expects “that it will be appropriate to remove monetary policy accommodation at a regular but gradual pace—and perhaps a bit faster than the three one-quarter-point increases envisioned for this year in the assessment of appropriate policy from the December 2017 [Federal Open Market Committee] meeting.”

Write to Sharon Nunn at sharon.nunn@wsj.com

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