Wholesale prices in the United States rose by a larger-than-expected 2.6% last month from a year earlier, a sign that some inflation pressures remain high. The increase, the sharpest year-over-year increase since March 2023, comes at a time when other price indicators are showing that inflation has continued to ease.
Quick Read
- Rising Wholesale Inflation: U.S. wholesale prices increased by 2.6% in June from a year earlier, marking the sharpest year-over-year rise since March 2023.
- Monthly Increase: The producer price index rose 0.2% from May to June, following an unchanged reading from the previous month.
- Core Inflation: Excluding volatile food and energy prices, core wholesale prices rose 0.4% from May and 3% from June 2023.
- Service Prices Drive Increase: The June increase was driven by a 0.6% rise in services prices, particularly due to higher profit margins for machinery and auto wholesalers.
- Goods Prices Decline: Overall prices of goods fell 0.5%, with notable decreases in gasoline (down 5.8%) and food prices.
- Consumer Inflation Context: The report follows data showing consumer inflation cooled in June for the third straight month, with a 0.1% decline from May to June.
- Fed’s Response: Despite continued inflation pressures, the Federal Reserve is expected to begin cutting interest rates in September, following 11 rate hikes to a 23-year high.
- Economic Impact: Rate cuts by the Fed could lower borrowing costs for mortgages, auto loans, and credit cards, and potentially boost stock prices.
- Persistent High Costs: Costs for food, rent, health care, and other essentials remain elevated, contributing to public discontent and posing a potential threat to President Joe Biden’s re-election bid.
- Economic Stability: Despite higher borrowing costs, the U.S. economy remains steady, with solid hiring and low unemployment providing Americans with job security.
The Associated Press has the story:
US wholesale inflation picked up in June in sign that some price pressures remain elevated
Newslooks- WASHINGTON (AP) —
Wholesale prices in the United States rose by a larger-than-expected 2.6% last month from a year earlier, a sign that some inflation pressures remain high. The increase, the sharpest year-over-year increase since March 2023, comes at a time when other price indicators are showing that inflation has continued to ease.
The Labor Department said Friday that its producer price index — which tracks inflation before it reaches consumers — rose 0.2% from May to June after being unchanged the month before. Excluding food and energy prices, which tend to bounce around from month to month, so-called core wholesale prices increased 0.4% from May and 3% from June 2023.
The increase in wholesale inflation last month was driven by a sizable 0.6% rise in services prices, led by higher profit margins for machinery and auto wholesalers. By contrast, the overall prices of goods fell 0.5%. Gasoline prices tumbled 5.8% at the wholesale level. Food prices also dropped.
The producer price index can provide an early sign of where consumer inflation is headed. Economists also watch it because some of its components, notably healthcare and financial services, flow into the Federal Reserve’s preferred inflation gauge — the personal consumption expenditures, or PCE, index.
Friday’s wholesale figures follow the government’s report Thursday that consumer inflation cooled in June for a third straight month. Consumer prices declined 0.1% from May to June — the first such drop in overall inflation since May 2020, when the economy was paralyzed by the pandemic.
As a whole, this week’s price figures, along with other recent data, still suggest a continued slowdown in the inflation that first gripped the nation three years ago, when the economy rocketed out of the pandemic recession, leaving deep supply shortages and sending prices soaring.
The Fed raised its benchmark interest rate 11 times in 2022 and 2023, to a 23-year high, to try to curb the price spikes. Inflation has since cooled from its four-decade high of 9.1%, and the central bank is widely expected to begin cutting interest rates in September.
Rate cuts by the Fed would likely lead, over time, to lower borrowing costs for mortgages, auto loans and credit cards as well as business borrowing, and could also boost stock prices.
A brief pickup in inflation early this year had caused Fed officials to scale back their expectations for interest rate cuts. The policymakers said they would need to see several months of mild price increases to feel confident enough to cut their key rate from its 23-year high.
Even as inflation slows by most measures, the costs of food, rent, health care and other necessities remain much higher than they were before the pandemic — a source of public discontent and a potential threat to President Joe Biden’s re-election bid.
Yet despite the lingering inflation pressures and higher borrowing costs, the U.S. economy remains steady, if gradually slowing. Hiring is still solid. And unemployment remains relatively low, giving Americans unusual job security.
