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US June import prices up 2.6 pct on oil price surge

WASHINGTON - U.S. import prices climbed 2.6 percent in June on a surge in petroleum imports that led to gains in a broad range of sectors, government data on Friday showed, adding more evidence of inflation worries as the economy limps ahead.

Import prices for petroleum products, including crude oil, rose 7.4 percent in June. They were up 78.6 percent for the year, which was the largest annual increase since February of 2003, the Labor Department said.

Economists polled ahead of the report were expecting overall import prices to rise 1.9 percent, and with oil hitting a new record above $146 per barrel on Friday, bigger gains in import prices will be expected.

The continued surge in fuel costs drove up airline fares from foreign airline carriers for the month by the biggest amount on record, a Labor official said.

Excluding petroleum, import prices rose 0.9 percent in June, the ninth straight increase. That reflected a continued rise in prices for food, feed and beverages, which rose 1.9 percent during the month and was the largest yearly rise on record.

For the 12 months ended in June, overall import prices rose 20.5 percent, also the largest gain on record. But the increases were not just driven by higher oil import prices, as non-fuel imports also saw a record increase during the 12-month period.

This latest data will no doubt add to the inflation fears Federal Reserve policy-makers have been raising lately.

To help buoy the economy and financial markets through the worst of the housing slump and subprime mortgage crisis, the central bank, through a series of cuts, reduced its benchmark fed funds rate down to 2 percent.

The Fed last month halted that aggressive rate cut campaign that had begun in September and now some inflation-wary Fed policy makers have indicated that an increase could be needed to help tame inflation. But a rate increase would come at a bad time as financial markets are still roiled by mortgage troubles.