HomeInflationProducer prices surge 1.8% in June, led by energy costs

Producer prices surge 1.8% in June, led by energy costs

U.S. producer prices jumped to double the level expected, as surging energy prices weighed in heavily for the month.

The Producer Price Index (PPI) rose by 1.8% in June, the biggest increase since November 2007, according to a Labor Department report released Tuesday. The PPI measures prices at the factory door and inflation pressures before they reach the consumer.

The June PPI increase follows a 0.2% rise in May when energy costs had increased 2.9%. While gasoline prices have declined in recent weeks and in particular during early July, they are not reflected in June numbers, which shows energy prices climbed 6.6% — with heating oil costs rising 15.4% and gasoline prices soaring 18.5%.

"Sharply higher gasoline prices are the primary culprit behind the jump in the headline number," Tom Porcelli, a senior economist at RBC Capital Markets in New York, was quoted on Bloomberg. For other items, he said, "the risk is skewed toward prices remaining soft over the near term."

Excluding volatile food and energy costs, the core PPI rose 0.5% following a 0.1% decline a month earlier. The figure also outpaced expectations and is more likely to increase fears over the potential for resurging inflation. However, reports show many economists feel concern there would be premature.

"We’re experiencing deflation still," said Bernard Baumohl of the Economic Outlook Group. "That’s largely because U.S. and international economies are so very weak."

The government’s Consumer Price Index (CPI) for June is scheduled for release on Wednesday at 8:30 AM ET. The CPI measures inflation pressures at the consumer level.


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