Wholesale Prices Rise Faster than Expected

A key measure of wholesale prices rose in June at nearly twice the increase economists had forecast. It was the sharpest rise for the index since November 2007.

The Producer Price Index, which tracks how much it costs for manufacturers to make things, rose +1.8% last month. Analysts had foreseen a +1.0% advance.

Higher energy prices accounted for most of the increase. June’s gasoline prices were +18.5% higher than May’s. The energy segment of the index rose +6.6%, after a +2.9% rise the month before.

Higher wholesale prices are typically passed on to consumers at the retail level. Such higher prices can contribute to inflation and imperil a second-half recovery. Market watchers say that concern is mitigated by the fact that prices overall are down -4.6% from a year ago.

“Core” PPI, which excludes volatile food and energy prices, rose +0.5% in June, compared with a -0.1% decrease the month before. The June gain was the largest for the index since October 2008. The cost of raw materials like crude and steel rose +4.6% in June after a +3.6% rise in May.

The Bureau of Labor Statistics releases the Consumer Price Index, which tracks retail prices for a basket of consumer goods, tomorrow. Economists expect a +0.6% change.