Producer prices in the U.S. unexpectedly showed a modest increase in the month of June, according to a report released by the Labor Department on Friday, with prices rebounding slightly after showing a sharp drop in the previous month.
The Labor Department said its producer price index edged up by 0.1 percent in June after tumbling by 1.0 percent in May. The modest increase surprised economists, who had expected prices to see further downside and fall by about 0.4 percent.
The modest rebound by producer prices was partly due to higher food prices, which rose by 0.5 percent in June after falling by 0.6 percent in May.
A 3.1 percent jump in meat prices contributed to the increase in food prices, which marked the biggest increase since food prices rose by 1.0 percent in November of 2011.
On the other hand, the report showed a continued drop by energy prices, which fell by 0.9 percent in June after plummeting by 4.3 percent in May. The continued decrease was partly due to a 2.1 percent drop in prices for residential electric power.
Excluding food and energy prices, the core producer index rose by 0.2 percent in June. The increase matched the core price growth seen in each of the three previous months and came in line with economist estimates.
The increase in core prices was partly due to a 1.4 percent increase in prices for light motor trucks. Higher prices for major household appliances and pet food also contributed to the continued core price growth.
Compared to the same month a year ago, producer prices rose by 0.7 percent in June, unchanged from the previous month. Core prices rose at an annual rate of 2.6 in June compared to the 2.8 percent growth seen in May.
Jim O'Sullivan, Chief U.S. Economist at High Frequency Economics, said, "Next week's CPI will be more important for Fed officials in deciding whether to add more stimulus, although both series are sending similar messages."
"With core inflation fairly neutral, the case for more easing will depend primarily on the growth numbers, which so far have shown slowing but not a collapse," he added.
Next Tuesday, the Labor Department is due to release a separate report on consumer price inflation in the month of June.
Consumer prices fell by 0.3 percent in May, marking the largest monthly decrease since December of 2008. Core prices rose by 0.2 percent in May, matching the increases seen in both April and March.
by RTT Staff Writer
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