U.S. Wholesale Prices Rose 0.2% in May

Wholesale costs in the U.S. rose more than forecast in May, led by higher prices for fuel and the fastest rise in 30 years for apparel and textiles.

The 0.2 percent increase in the producer-price index compares with the 0.1 percent median estimate of economists surveyed by Bloomberg News, Labor Department figures showed today in Washington. The so-called core measure, which excludes volatile food and energy costs, increased 0.2 percent, matching projections.

The costs of apparel and other fabricated textile products rose 1.0 percent in May, the fastest since 1.3 percent in April 1981.

Higher input prices mean companies like Under Armour Inc. are passing on increased costs to consumers, whose incomes may be strained by unemployment above 9 percent. At the same time, Federal Reserve Chairman Ben Bernanke has reiterated that he expects commodity costs to ease in coming months.

“There is a bit more of an inflationary impulse in the system than most people appreciate, though it is a modest impulse,” Tom Porcelli, chief U.S. economist at RBC Capital Markets Corp. in New York, said before the report. “Companies’ margins are being hurt so they’re going to be looking to pass on a lot of these costs.”

Commodity prices have retreated since the end of April on concern rising interest rates in countries from China to India will slow the global economy. Oil prices that rose amid Middle Eastern unrest and helped lift the index in April have since moderated. Crude oil futures on the New York Mercantile Exchange reached $113.93 a barrel on April 29, the highest level since September 2008, before closing at $102.7 a barrel on May 31.

Crude Oil

Crude for July delivery was at $97.41 a barrel, up 18 cents, in electronic trading on the New York Mercantile Exchange at 6:17 a.m. New York. The contract yesterday declined $1.99, or 2 percent, to $97.30, the lowest settlement since May 17. Futures have gained 30 percent in the past year.

Estimates for producer prices were based on forecasts from 74 economists. Projections ranged from a decline of 0.4 percent to an increase of 0.6 percent, after a 0.8 percent advance in April.

Wholesale prices excluding volatile food and energy costs were projected to rise 0.2 percent from the prior month, the Bloomberg survey showed. The so-called core index rose 0.3 percent in April.

Compared with a year earlier, companies paid 7.3 percent more for goods last month after a 6.8 percent rise in April.

Core wholesale prices climbed 2.1 percent in the 12 months ended in May.

The 2011 results of Under Amour, which makes sporting apparel, shoes and gear, are being “adversely impacted” by raw material inflation, high exposure to Chinese wage inflation and exposure to oil-based materials, according to Brad Dickerson, chief financial officer of the Baltimore-based company.

“We are taking a much broader view at retail price increases to help combat accelerating costing pressures,” Dickerson said during a June 9 conference call with investors. “We are optimistic that some of the apparel cost pressures will begin to abate” in the second half of 2012.

Under Armour

“We haven’t met any reluctance from the consumers when we push price,” Under Armour Chief Executive Officer Kevin Plank said during the meeting. “With the growing expenses that we’re all feeling for the manufacturing basis, I think that we have room for that consumer and we haven’t tried to push that yet.”

Fuel costs rose 1.5 percent as gasoline prices increased 2.7 percent, today’s report showed. The cost of food decreased 1.4 percent in May.

Producer prices are calculated based on costs on the Tuesday of the week containing the 13th of the month, which may influence month-to-month changes.

Prices for producers “continued to increase in most regions,” said the Fed’s Beige Book, based on information collected from the central bank’s districts on or before May 27. Prices for consumers “increased only modestly, except for food and energy prices, which continued to escalate,” the June 8 report said.

The central bank’s preferred price gauge, which excludes food and fuel, rose 1 percent in April from a year earlier. Fed policy makers aim for long-run overall inflation of 1.7 percent to 2 percent, according to their April forecast.

Bernanke Inflation

Fed Chairman Bernanke said the day before the Beige Book was released that he doesn’t see “much evidence that inflation is becoming broad-based or ingrained.” The chairman said the economy will likely pick up as fuel costs moderate and parts supply disruptions ease as factories in Japan recover from the Asian nation’s March natural disasters.

Producer prices are one of three monthly inflation gauges reported by the Labor Department. Prices of goods imported into the U.S. climbed 0.2 percent in May from the prior month, data showed last week. Costs advanced 12.5 percent from May 2010, the biggest 12-month increase since September 2008.

Consumer prices, the broadest of the three measures, probably rose 0.1 percent in May and the core index probably had a 0.2 percent gain, according to the median forecasts of 78 economists who responded to a Bloomberg survey as of 5 p.m. yesterday. The Labor Department releases the consumer price index report tomorrow.

To contact the reporter on this story: Alex Kowalski in Washington at akowalski13@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net

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