Core prices at the factory gate jumped at twice the expected rate in April as businesses continued to absorb rising costs linked to more expensive imports and commodities.

Core wholesale prices, which exclude food and energy, rose by 0.4 per cent last month, double the rate recorded in March, reflecting a jump in car and furniture costs at the producer level.

The headline producer price index increased by a less-than-expected 0.2 per cent in April following a 1.1 per cent jump last month.

Analysts had expected a 0.4 per cent increase in headline prices and only a 0.2 per cent rise in the core rate.

Investors fear a sustained spike in producer prices could force the Federal Reserve to raise interest rates again later this year to prevent an inflationary spillover.

In a speech on Tuesday Fed vice chairman Donald Kohn said current monetary policy appeared to be “appropriately calibrated for now to promote both rising employment and moderating inflation over the medium term.”

However, he expressed concern that if long-term inflation expectations became unmoored, policy markers would face “a more serious situation”.

A gauge of five-year consumer inflation expectations on Friday hit its highest level since 1996.

Core wholesale prices for finished goods have increased by 3 per cent in the past 12 months, the fastest annual rate in more than 16 years.

Some economists argue that businesses are struggling to pass on rising commodity prices to US consumers as the domestic economy slows. The core consumer price index rose by only 0.1 per cent in April.

The housing market slump, a decline in available credit and meagre consumer confidence may mean shoppers are more reluctant to pay top dollar for goods and services.

“With domestic demand slowing sharply and operating rates in the economy dropping, the steady build up in cost pressures at various stages of the PPI likely will present an increasing problem for [profit] margins,” David Greenlaw, economist at Morgan Stanley said.

The most worrying aspect of the report for many economists was a big jump in prices at an early stage in the production pipeline.

Crude goods prices, excluding food and energy, rose by 7.9 per cent in April, spurred by a 32.2 per cent surge in the cost of iron and steel scrap.

“Even if the linkages between PPI onto CPI have been weak, the pipeline pressures are acute enough to continue to ‘fuel’ concerns that the supply side will more than offset the easing demand related price pressures,” Alan Ruskin, strategist at RBS Global Banking & Markets, said.

Core producer prices usually trend lower than the headline rate but a decline in seasonally adjusted energy prices last month meant the pattern was reversed.

Although energy prices have soared in recent weeks, they have not increased at the pace normally seen at this time of year.

The energy index fell 0.2 per cent after jumping 2.9 per cent in March, helped by a 4.6 per cent decline in seasonally-gasoline prices. Gasoline prices at the producer level have increased by 23 per cent in the past 12 months.

Food prices, which have also seen huge price increases in recent months, were unchanged in April.