WASHINGTON (Reuters) - U.S. producer prices increased more than expected in April amid strong gains in the costs of services and goods, indicating that inflation remained elevated early in the second quarter.

The producer price index for final demand rose 0.5% last month after falling by a downwardly revised 0.1% in March, the Labor Department's Bureau of Labor Statistics said on Tuesday.

Economists polled by Reuters had forecast the PPI gaining 0.3% after a previously reported 0.2% rise in March. In the 12 months through April, the PPI increased 2.2% after climbing 1.8% in March.

Inflation surged in the first quarter amid strong domestic demand after slowing for much of last year. Economists are optimistic that prices will resume their downward trend this quarter as the labor market is cooling.

Financial markets expect the Federal Reserve to start its easing cycle in September, though some economists believe the first interest rate cut could come in July.

The U.S. central bank early this month left its benchmark overnight interest rate unchanged in the current 5.25%-5.50% range, where it has been since July. The Fed has raised its policy rate by 525 basis points since March 2022.

Consumer price data on Wednesday could offer fresh clues on the timing of the much-awaited rate cut.