US producer prices rise from year ago by most since 2011

US wholesale prices rose in the 12 months ended in June by the most since November 2011 as the costs of services accelerated, a Labour Department report showed on Wednesday in Washington.

Highlights of producer prices (June)

• Producer-price index rose 3.4% y/y (est. 3.1%) after 3.1% gain in prior 12-month period.

• PPI rose 0.3% m/m (est. 0.2%) after 0.5% gain the prior month.

• Excluding food and energy, core gauge also rose 0.3% m/m (est. 0.2%) and was up 2.8% y/y (est. 2.6% gain).

• PPI excluding food, energy, and trade services, a measure some economists prefer because it strips out the most volatile components, increased 2.7% y/y.

Key takeaways

The figures, which measure wholesale and other selling prices at businesses, indicate that inflation pressures in the production pipeline are firming amid rising demand and tariffs on steel and other goods.

The June index for final demand services climbed 0.4% from a month earlier, the most since January, and 2.8% from the same month a year ago. More than 40% of the advance was due to higher retail margins for fuel.

The gain also reflected a 1.3% month-over-month jump in truck transportation of freight, the largest in data back to July 2009.

In contrast, the cost of goods rose 0.1% in June from a month earlier, reflecting cooling energy prices, after a 1% May surge.

While the consumer price index – due on Thursday - is considered a more important indicator of inflation, producer prices help provide insights into the direction of input costs that businesses are facing.

Concern about higher materials and services costs remains elevated after the US imposed tariffs on aluminium earlier this year, followed by additional levies on other Chinese imports.

The Trump administration announced on Tuesday that it’s ready to impose tariffs on $200bn of Chinese-made products, ranging from clothing to television parts to refrigerators.

Other details

• Excluding the volatile categories of food, energy, and trade services, producer costs rose 0.3% from the previous month following a 0.1% increase.

• Energy prices rose 0.8% from the prior month after jumping 4.6%; food costs fell 1.1%.

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