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Wholesale prices increase more than forecast in June

By Shobhana Chandra
Bloomberg News

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Wholesale prices rose more than projected in June, reflecting higher costs for energy and automobiles.

The 0.8 percent gain in the producer price index was the biggest since September and followed a 0.5 percent rise the prior month, a Labor Department report showed Friday in Washington. The median estimate in a Bloomberg survey of 73 economists called for a 0.5 percent gain. The so-called core measure, which excludes food and fuel prices, increased 0.2 percent, also more than forecast.

The data also showed limited cost pressures at the earlier stages of production, indicating demand for materials is being restrained by slower growth in China and weakness in Europe. That helps explain why Federal Reserve policymakers project inflation is likely to be at or below the central bank’s goal.

“The increase in producer prices is very much an energy story,” said Gennadiy Goldberg, a strategist at TD Securities Inc. in New York, who accurately forecast the gain in core costs. “We’re not seeing much of the gain translate into higher consumer prices yet.”

Compared with the same month a year earlier, companies paid 2.5 percent more for goods, the biggest 12-month increase since March 2012. The core index increased 1.7 percent in the 12 months ended in June, matching the year-over-year gains in the prior three months.

The cost of automobiles jumped 0.8 percent in June, the most since November 2011. Car prices are still down 0.2 percent from June 2012.

Energy costs climbed 2.9 percent from May, the most in four months and reflected more expensive gasoline, diesel fuel and heating oil.

The cost of finished consumer foods rose 0.2 percent, led by the biggest increase in meat prices since May 2010.

General Mills Inc., the maker of Cheerios cereal and Yoplait yogurt, is among companies that are weathering higher materials costs. It projects a 3 percent rise in input expenses for its fiscal year ending May 2014, with gains in energy and goods such as soy and sugar. At the same time, it expects new products will cushion the costs.

Producer prices are one of three monthly inflation gauges from the Labor Department. Import prices fell in June for a fourth straight month as costs dropped for food, natural gas and motor vehicles, data showed.

The consumer-price index, the broadest of the three measures, may have climbed 0.3 percent in June, economists projected ahead of the report to be released Tuesday.


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