Wholesale prices in the U.S. rose more than projected in June, reflecting higher costs for energy and automobiles.
The 0.8 percent gain in the producer price index was the biggest since September and followed a 0.5 percent rise the prior month, a Labor Department report showed today in Washington. The median estimate in a Bloomberg survey of 73 economists called for a 0.5 percent gain. The so-called core measure, which excludes volatile food and fuel, increased 0.2 percent, also more than forecast.
The data also showed limited cost pressures at the earlier stages of production, indicating demand for materials is being restrained by slower growth in China and weakness in Europe. That helps explain why Federal Reserve policy makers project inflation is likely to be at or below the central bank’s goal.
“The increase in producer prices is very much an energy story,” said Gennadiy Goldberg, a strategist at TD Securities Inc. in New York, who accurately forecast the gain in core costs. “We’re not seeing much of the gain translate into higher consumer prices yet.”
Estimates in the Bloomberg survey ranged from gains of 0.1 percent to 0.9 percent. Core wholesale prices were projected to rise 0.1 percent for a second month, the survey median showed.
Stock-index futures were little changed after the figures. The contract on the Standard & Poor’s 500 Index fell 0.1 percent to 1,669.2 at 8:49 a.m. in New York.
Compared with the same month a year earlier, companies paid 2.5 percent more for goods, the biggest 12-month increase since March 2012. The core index increased 1.7 percent in the 12 months ended in June, matching the year-over-year gains in the prior three months.
The cost of automobiles jumped 0.8 percent in June, the most since November 2011. Car prices are still down 0.2 percent from June 2012.
Energy costs climbed 2.9 percent from May, the most in four months and reflecting more expensive gasoline, diesel fuel and heating oil.
The cost of finished consumer foods rose 0.2 percent, led by the biggest increase in meat prices since May 2010.
Expenses for intermediate goods increased 0.5 percent, the first gain since February. Costs for crude goods were little changed.
General Mills Inc. (GIS), the maker of Cheerios cereal and Yoplait yogurt, is among companies that are weathering higher materials costs. It projects a 3 percent rise in input expenses for its fiscal year ending May 2014, with gains in energy and goods such as soy and sugar. At the same time, it expects new products will help to cushion the costs.
“Our prices are stable,” Kendall Powell, chairman and chief executive officer of the Minneapolis-based company, said on an earnings conference call on June 26. “Inflation is moderate, and we think will be quite manageable for us.”
Many Fed officials want to see more signs employment is picking up before they’ll begin slowing the pace of $85 billion in monthly bond purchases, according to minutes of policy makers’ June meeting released this week.
“Highly accommodative monetary policy for the foreseeable future is what’s needed in the U.S. economy,” Fed Chairman Ben S. Bernanke said in response to a question after a July 10 speech in Cambridge, Massachusetts. He said he expects inflation to “come back up” closer to the Fed’s 2 percent goal.
Global economic growth will struggle to accelerate this year as a U.S. expansion weakens, China’s economy levels off and Europe’s recession deepens, the International Monetary Fund said this week as it cut its 2013 forecast.
Producer prices are one of three monthly inflation gauges from the Labor Department. Import prices fell in June for a fourth straight month as costs dropped for food, natural gas and motor vehicles, data showed yesterday. The consumer-price index, the broadest of the three measures, may have climbed 0.3 percent in June, economists projected ahead of the July 16 report.
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