INSTANT VIEW 6-U.S. core PPI tops forecasts, headline tame

NEW YORK (Reuters) - U.S producer prices rose by a smaller-than-expected 0.2 percent in April after gasoline prices sank, government data showed on Tuesday, but core inflation at the producer level posted a larger advance.

KEY POINTS: * Economists polled by Reuters had expected that producer prices - a gauge of costs at the farm and factory gate - would rise 0.4 percent after mounting 1.1 percent in March. * Core producer prices, which strip out volatile energy and food costs, increased by 0.4 percent. That was twice the rate that had been forecast. Core producer prices over the last 12 months rose 3.0 percent, the largest gain since December 1991. * Gasoline prices at the producer level fell 4.6 percent, but they were up 23 percent over the past year. Overall producer prices were up 6.5 percent on a year-on-year basis. Food prices were unchanged in April, although within that category the price of rice jumped by 17.4 percent, notching the largest rise since 1993.

COMMENTS:

CARL LANTZ, U.S. INTEREST RATE STRATEGIST, CREDIT SUISSE

NEW YORK:

"The point here is that we know CPI was really tame last month. On a core basis it was 0.1 percent while we got a 0.4 percent increase in core PPI.

"That points to an inability of producers to pass on higher costs to the consumer, which just reinforces the idea that the U.S. consumer is very weak."

JEOFF HALL, CHIEF U.S. ECONOMIST, IFR MARKETS, BOSTON:

"There was some acceleration in the non-energy sector with a curious rise in furniture and household durables. It may be costing more to ship them and bring them out of warehouses rather than more demand for them.

"Food prices were held in bay in April but they should rise in May.

"The three-month annualized rate on the core is 4.9 percent. That's just too much inflation to deal with. In terms of tinkering with monetary policy, the next move for the Fed will likely be a hike.

"This (report) will take a swipe at stocks. From an asset allocation perspective, stocks will suffer more than bonds today."

DAVID RESLER, CHIEF ECONOMIST, NOMURA SECURITIES, NEW

YORK:

"The headline number is a bit surprisingly low, and the core rate was surprisingly high. I tend to put more stock in trying to decipher underlying trends in the core rate, and the increase this month was surprising and somewhat disappointing.  Continued...