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Producer prices jump

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Producer prices jump

0.4% increase in PPI increases likelihood of interest rate hike this fall.

The Producer Price Index for final demand rose 0.4% in June, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. Final demand prices increased 0.5% in May and

fell 0.4% in April. On an unadjusted basis, the final demand index declined 0.7% for the 12 months ended in June, the fifth straight 12-month decrease.

Analysts had expected an increase in June’s PPI of 0.4%.

The increase for the month can be traced largely to prices for goods, which rose 0.7%. The index for services also increased, at a 0.2% clip.

Gasoline prices increased 4.3% during June, following a 17% spike in May. Food costs – largely the result of an outbreak of bird flu – rose 0.6%, following a 0.8% increase in May.

The rise in wholesale inflation, if sustained, will likely trigger the Fed to enact its long-anticipated reduction in quantitative easing by raising interest rates in the fall – an act delayed by disappointing economic performance in the first part of the year.

 

 

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