Producer prices were unexpectedly flat in March as a drop in gasoline costs offset rising food prices, according to a government report on Thursday that also showed moderate underlying inflation pressures.

The Labor Department said its seasonally adjusted producer price index was unchanged last month after advancing 0.4 percent in February.

Economists polled by Reuters had expected prices at farms, factories and refineries to rise 0.3 percent.

Wholesale prices excluding volatile food and energy costs rose 0.3 percent after February's 0.2 percent gain.

That was a touch above economists' expectations for a 0.2 percent advance and marked the fifth successive month of increases in core PPI.

Over one-third of the rise in core PPI was attributed to prices for light motor trucks. Higher costs for passenger cars, soaps and other detergents also contributed to the advance in core PPI.

However, manufacturers have limited scope to pass on these increased costs to consumers given the still considerable slack in the economy.

Overall producer prices were held back by a 2.0 percent fall in gasoline, the largest decline since October, after a 4.3 percent jump in February. That offset a 0.2 percent rise in food prices, which halted three straight months of declines.

However, gasoline prices rose 7.5 percent, when seasonal factors are excluded.

In the 12 months to March, wholesale prices increased 2.8 percent, the smallest increase since June 2010, after advancing 3.3 percent in February.

Outside food and energy, producer prices were pushed up by light motor trucks prices, which rebounded 0.7 percent after falling 0.4 percent in February. Passenger car prices rose 0.8 percent after edging up 0.1 percent the prior month.

The increases likely reflected strong demand for automobiles.

In the 12 months to March, core producer prices increased 2.9 percent after rising 3.0 percent the previous month.

(Reporting By Lucia Mutikani; Editing by Neil Stempleman)

Inflation