Wholesale prices rise in June

WASHINGTON - Wholesale prices in the United States rose by a larger-than-expected 0.5 per cent in June but core inflation, excluding food and energy, edged up just 0.2 per cent

By (AP)

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Published: Wed 19 Jul 2006, 3:05 AM

Last updated: Sat 4 Apr 2015, 3:12 PM

The Labor Department also reported on Tuesday that wholesale food prices increased 1.4 per cent last month, with prices for processed chickens jumping 12.1 per cent and increases marked by eggs, fresh fruit and dairy products. Wholesale energy prices rose 0.7 per cent.

For wholesale prices overall, analysts had been expecting an increase in June of 0.3 per cent. Core inflation was in line with expectations.

The 0.5 per cent increase followed rises of 0.2 per cent in May and 0.9 per cent in April.

Concern has permeated the markets that higher inflation will prompt further interest rate hikes by the Federal Reserve and contribute to a more severe economic slowdown.

¢Overall, wholesale price inflation continues at a pace that makes the Federal Reserve uneasy, even as economic growth slows,” said Peter Morici, a professor at the University of Maryland’s business school. ¢If the Fed acts too vigorously to contain inflation, it risks a recession and stagflation.”

Economic unease deepened last week amid interest rate jitters and escalating violence in the Middle East that carried oil prices to new highs.

Analysts will be watching closely a key inflation signpost, consumer prices for June, which will be released on Wednesday, and Fed Chairman Ben Bernanke’s testimony before Congress that day.

On Monday, the Fed reported that output at the US factories, mines and utilities jumped by a stronger-than-expected 0.8 per cent last month following a gain of 0.1 per cent in May. The report could stoke anxiety over inflation and prompt Fed policy-makers to raise interest rates next month, experts said.

Economists generally believe that manufacturing will slow in coming months as overall economic growth slows.

The economy expanded at a brisk pace of 5.6 per cent in the first three months of the year but many analysts believe that will slow to around 3 per cent in the April-June quarter, as consumers struggle with rising interest rates, soaring gasoline prices and cooling home sales.

The increase in production in June put US industry operating at 82.4 per cent of capacity, a six-year high, up from a May operating rate of 81.8 per cent of capacity.

The Fed keeps a close watch on the operating rate to see if it is approaching levels where bottlenecks could develop and threaten to boost inflationary pressures.

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