Wholesale Prices Climbed in June, But Deflation Pressures Continue
By JOSEPH REBELLO and JEFF BATER
DOW JONES NEWSWIRES
Wholesale prices rose in June after two monthly declines, pushed higher by rising food and energy costs. Underlying deflation pressures persist, however.
The producer-price index for finished goods rose by a larger-than-expected 0.5% last month, on a seasonally adjusted basis. The increase was due largely to a 3.4% rise in energy prices. However the closely watched core index -- excluding food and energy items -- fell 0.1%, the fifth drop in eight months.
Meanwhile, the U.S. trade deficit widened by $190 million to $41.84 billion in May as demand for foreign cars rose. U.S. exports rose for the first time in three months, increasing 0.9%. But imports grew nearly as fast, increasing 0.7% despite a big drop in oil prices.
The numbers highlighted persistent strains on the U.S. economy and the downward pressure on prices that has come with those strains, analysts said. "What we're picking up from the PPI numbers is rising costs amid a lack of pricing power," said John Lonski, an economist with Moody's Investors Service in New York. "It suggests a squeeze on profit margins, which does not favor a recovery in capital spending."
The Labor Department's report on producer prices showed that inflation was strongest at the initial stages of production and weakest at the final stage, suggesting that companies enjoy little ability to pass rising costs on to consumers. Prices of crude, or unprocessed, goods rose 4.5%, the fastest rate in three months. Prices of intermediate, or semiprocessed, goods rose 0.5% after two consecutive months of decline.
Among finished goods, food prices rose 0.4%. But prices of capital equipment declined 0.1%, reversing the 0.1% gain recorded in May. Prices of computers fell 1.1%, the biggest drop in four months. Passenger-car prices fell 0.7% after a 0.2% increase in May. Prices of communications equipment fell 0.7%.
In its report on the trade balance in May, the Commerce Department said the U.S. trade deficit with China grew to $9.86 billion from $9.45 billion in April; the deficit with Canada grew to $4.09 billion from $3.81 billion; the deficit with Mexico grew to $3.42 billion from $3.34 billion. But the trade deficit with Western Europe narrowed to $8.26 billion in May from $8.44 billion in April. The deficit with Japan narrowed to $4.49 billion, compared with a $5.97 billion deficit in April. It is the lowest U.S. deficit with Japan since January 1998, the department said.
Write to Joseph Rebello at joseph.rebello@dowjones.com and Jeff Bater at jeff.bater@dowjones.com
Updated July 14, 2003 |
