U.S. Producer Prices Unexpectedly Fell 0.1% in June; 1st Drop in 4 Months
By Vincent Del Giudice
U.S. Producer Prices Fell 0.1% in June; Core Rate Fell 0.2%
Washington, July 14 (Bloomberg) -- Prices paid to U.S.
factories, farmers and other producers unexpectedly dropped in
June -- the first decline in four months -- reflecting lower
costs for energy, autos and computers.
The producer price index fell 0.1 percent last month, the
Labor Department said. The core rate, which excludes food and
energy, fell 0.2 percent during the month.
During May, the PPI rose 0.2 percent and core rate increased
0.1 percent. For June, analysts expected 0.1 percent increases in
both the PPI and the core rate.
''Inflation is benign,'' said Kevin Flanagan, an economist
at Morgan Stanley Dean Witter in New York, before the report.
''There's no urgency for the Fed'' to raise the overnight bank
lending rate again to keep prices in check, he said.
The decline in the overall PPI was the first since a 0.5
percent drop in February, the Labor Department said. The decline
in the core rate was the first since a 0.2 percent drop in
January.
For the year to date, the PPI has risen at a 1.5 percent
annual rate, compared with a 1.5 percent decline for the six
months through June 1998. The core rate of the PPI has fallen at
a 0.4 percent rate this year, compared with a 1.4 percent
increase through June 1998.
Producer energy prices fell 0.3 percent during June, the
first decline since February, as both gasoline and home heating
oil costs retreated. Food prices increased 0.4 percent, in part
reflecting the biggest increase in beef costs since October 1985.
Computers and Autos
Computer prices dropped 1.4 percent in June, continuing a
pattern. The last time producer computer prices rose was in
September 1994. Producer tobacco prices were unchanged. Auto
prices decreased 1.3 percent and prescription drug prices rose
0.2 percent.
Intermediate goods prices increased 0.4 percent last month.
Intermediate goods prices excluding food and energy rose 0.5
percent.
Crude goods prices increased 1.4 percent during June,
reflecting a 3.4 percent rise in crude oil costs. Crude goods
prices excluding food and energy rose 0.5 percent.
On June 30, Federal Reserve policy-makers raised the
overnight bank lending rate a quarter point to 5 percent to cool
economic growth and keep inflation from accelerating. It was the
Fed's first rate increase since March 1997.
''They're being pre-emptive,'' said Gary Thayer, chief
economist at A.G. Edwards & Sons in St. Louis. The Fed has
repeatedly expressed concern about the economy's strength and the
effects of that strength on demand and ultimately on prices.
Underscoring the Fed's concern, a recent survey showed more
companies find it easier to raise prices on the goods and
services they produce. Businesses said they expect that situation
to continue through the rest of this year as consumer demand
stays high, according to the survey released last week by the
National Association for Business Economics.
Steel and Oil
Allegheny Teledyne Inc., of Pittsburgh, the world's biggest
specialty-metals maker, said it will raise its stainless steel
prices by about 7 percent because of higher costs for the raw
materials used to make the product. Rival producer J&L Specialty
Steel Inc. said it will match the increase by reducing discounts
to certain customers.
Stainless steel, made with chromium and sometimes nickel, is
used in autos, appliances, surgical tools and other products.
Benchmark nickel prices on the London Metal Exchange have risen
more than 15 percent in the past three months. Today's report
showed prices of intermediate steel mill products rose 1.1
percent in June after declining in the two previous months.
Oil prices, too, have been creeping higher. Crude oil closed
above $20 a barrel yesterday for the first time since November
1997.
An industry report this week showed that strong gasoline
demand led to an unexpectedly large drop in motor fuel
inventories. Demand from gasoline wholesalers, as derived from
American Petroleum Institute figures, rose 5 percent to 9.55
million barrels a day, the second highest level ever, according
to Bloomberg calculations.
Yet, computer prices keep falling. Intel Corp., the leading
computer-chip maker, last month lowered prices on its low-cost
Celeron microprocessors by as much as 21 percent as it steps up
its push to gain business in the market for cheap personal
computers.
Tomorrow, the Labor Department is expected to report the
consumer price index increased 0.1 percent in June after showing
no change during May, analysts said. The CPI core rate probably
increased 0.2 percent last month after rising 0.1 percent during
May, analysts said. |
