Jump In Gas Prices Pushes U.S. Producer Prices Higher Than Expected

(RTTNews) - With energy prices showing a substantial increase, the Labor Department released a report on Friday showing that U.S. producer prices rose by more than expected in the month of June.

The Labor Department said its producer price index rose by 0.8 percent in June following a 0.5 percent increase in May. Economists had been expecting the price growth to match the increase seen in the previous month.

The bigger than expected increase in producer prices was largely due to the increase in energy prices, which surged up by 2.9 percent in June after climbing by 1.3 percent in May.

A 7.2 percent jump in gasoline prices contributed to the increase in energy prices along with higher prices for home heating oil and diesel fuel.

The report also said food prices rose by 0.2 percent in June following a 0.6 percent increase in May, with the growth led by a 4.2 percent jump in meat prices.

The Labor Department said its core producer price index, which excludes food and energy prices, edged up by 0.2 percent in June after inching up by 0.1 percent in each of the two previous months. Core prices had been expected to tick up by 0.1 percent for the third straight month.

A 0.8 percent increase in prices for passenger cars was a major contributor to the increase in core prices along with an advance in the index for light motor trucks.

Compared to the same month a year ago, producer prices rose by 2.5 percent in June compared to the 1.7 percent increase in May. The annual price growth in June was the fastest since a 2.8 percent increase in March of 2012.

Core prices increased by an annual rate of 1.7 percent in June, unchanged compared to the annual rate of growth seen in the previous month.

Amna Asaf, an economist at Capital Economics, said, "With previous falls in some commodity prices still to feed through, a decline in producer price inflation is on the cards."

"But we doubt that it will fall to a rate that will really concern the Fed now that commodity prices have stabilized," she added.

Next Tuesday, the Labor Department will provide a more complete picture on the inflation environment with the release of its report on consumer prices in the month of June.