WASHINGTON (AFP) — US wholesale inflation jumped a surprisingly strong 1.8 percent in June from May amid soaring energy and food prices, the Labor Department said Tuesday.
The headline increase in the department's seasonally adjusted producer price index, a gauge of inflation at the wholesale level, was the steepest since November and sharply exceeded market expectations of a 1.3 percent rise.
Core wholesale inflation, excluding volatile energy and food prices, was up 0.2 percent for the second month in a row, slightly lower than the consensus forecast of 0.3 percent.
On a 12-month basis, PPI soared 9.2 percent in June, the largest increase since June 1981.
The headline PPI advance in June followed gains of 1.4 percent in May and 0.2 percent in April.
The stronger-than-expected headline inflation data was the latest in a series of reports that have put the US Federal Reserve on alert against building price pressures amid a weak economy.
The PPI report was released ahead of testimony by Fed chairman Ben Bernanke to the Senate Banking Committee on the state of the US economy.
The Fed chairman, delivering his semiannual forecast to Congress, indicated that his outlook for better growth and cooling inflation remained subject to a "high degree of uncertainty."
The central bank forecast 2008 growth in a range of 1.0 to 1.6 percent, up from an April projection of 0.3 to 1.2 percent. The inflation outlook was hotter at 3.8 to 4.2 percent for overall prices but the outlook for "core" inflation excluding food and energy was unchanged at 2.2 to 2.4 percent.
Global Insight economist Kenneth Beauchemin pointed out that global competition and moderate labor costs were helping curb US inflation.
"The Federal Reserve continues to find a patch of blue sky with moderately rising core prices in the face of massive energy and other commodity prices hikes," Beauchmenin said.
"Why the disconnect? Not only has globalization intensified price competition, but also, the US labor market continues to unwind allowing only modest gains in labor compensation that keep labor costs in check."
The Labor Department said energy prices leapt 6.0 percent in June following a 4.9 percent gain in the previous month. The gain was led by a 6.6 percent jump in residential natural gas prices after a 3.8 percent rise in May.
By contrast, unleaded regular gasoline prices cooled to a 9.0 percent rise following a 9.6 percent increase in the previous month.
Food prices climbed 1.5 percent in June following a 0.8 percent rise in May. Prices of fresh and dry vegetables advanced 14.7 percent after declining 9.0 percent in the preceding month.
Excluding food and energy, the headline PPI advance was driven by passenger cars, pet food, aircraft and aeronautic equipment.
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