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>>> Wholesale Prices Shoot Up in June
By Jeannine Aversa
Associated Press Writer
Friday , July 14, 2000
Wholesale prices shot up 0.6 percent in June, led by the biggest jump in gasoline and other energy costs in three months and a record increase in residential natural gas prices.
The Labor Department reported Friday that the advance in its Producer Price Index, which measures inflation pressures before they reach consumers, came after prices were flat in May.
June's performance was a slightly worse reading on inflation than some analysts expected. They forecast that wholesale prices would rise 0.5 percent. The advance in June marked the biggest increase in wholesale prices since a 0.9 percent rise in March.
The jolt came from a 11.8 percent gain in gasoline prices, also the largest increase since March.
But outside the volatile energy and food categories, the "core" rate of inflation at the wholesale level fell an unexpected 0.1 percent in June, the best showing since January, suggesting that most other prices were well-behaved. Many analysts were expecting a 0.1 percent increase in June's core rate. In May, core prices rose 0.2 percent.
The Federal Reserve has boosted interest rates six times over the last year to slow economic growth and keep inflation under control.
So far this year, wholesale prices have been rising at an annual rate of 4.8 percent, compared with a 3 percent gain for all of 1999. The pickup in this year's wholesale prices largely reflects rising energy costs.
In June, all energy prices rose 5.1 percent, the biggest increase since March, and followed a 0.5 percent drop in May.
In addition to the rise in gasoline prices, residential natural gas costs increased by a record 5.7 percent last month, surpassing the previous record gain set in January 1997.
Home heating oil prices rose by 8.4 percent and prices for liquefied petroleum gas, such as propane, went up 17 percent in June.
The surge in gasoline prices has been blamed on a combination of refinery capacity problems, tight inventories and new environmental regulations requiring the use of more reformulated gas, which is a cleaner-burning fuel. Prices soared above $2 a gallon in some areas.
Crude oil prices remain high reflecting production limits by oil-producing nations and increased demand during the busy summer driving season. Prices continue to hover around $30 a barrel.
Rising energy prices eclipsed falling prices for food, which declined by 0.3 percent, the steepest decrease since October. In May, food prices fell 0.2 percent.
Lower prices for fish, fruits and vegetables outweighed higher prices for eggs and beef.
Elsewhere in the report, car prices fell 0.5 percent, the biggest drop since February. Cigarette prices declined 1.8 percent, the sharpest decrease since January and paper products fell 1.3 percent, the largest decline since August.
Separately, the National Association for Business Economics, in its survey of 127 members Friday, said 33 percent reported increasing their prices in the second quarter of this year, the highest percentage in five years. In the previous quarter, 29 percent said they increased their prices.
Also in the survey 60 percent reported rising costs for materials, up from 46 percent in the first quarter.
"This is the kind of inflation that sneaks up on you," said Diane Swonk, NABE president and chief economist for Bank One Corp. "No one is getting scorched yet, but inflation is warming up."
© 2000 The Associated Press <<<
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personalwealth.com
>>>Friday, July 14, 2000 08:55AM ET
June PPI Numbers Better than Expected
The U.S. Producer Price Index (PPI) for June PPI rose by 0.6% with most of the increase attributed to higher energy prices. The core rate, excluding food and energy, fell 0.1%, better than expected. The data suggest that with the exception of energy prices, inflationary pressures remain tame.<<< |
