WASHINGTON (AFP) — US wholesale prices spiked by their largest margin in 27 years in the year to July as inflationary pressures continue to roil the world's largest economy, a government survey showed Tuesday.
The report showed that the Labor Department's producer price index (PPI), a key gauge of inflation at the wholesale level, rose by a hefty 9.8 percent in July from a year ago.
That marked the biggest surge in annualized headline prices at the factory and farm gate since a 10.4 percent gain was recorded in June 1981.
The reading will likely not be welcomed by the Federal Reserve, which has been waging a campaign against inflationary pressures, but Fed policymakers expect inflationary pressures to ebb in coming months, especially as oil prices have cooled markedly of late.
On a monthly basis, overall prices rose by a more-than-expected 1.2 percent in July against market forecasts which had predicted a rise of 0.4 percent. Headline PPI had climbed 1.8 percent in June.
The core PPI rate, which strips out volatile energy and food costs, increased by a more-than-anticipated 0.7 percent in July from June, or 3.5 percent over the past 12 months. Economists had predicted a lesser core rate monthly increase of 0.2 percent.
The 3.5 percent jump in the annualized core rate was the strongest since May 1991.
The larger-than-predicted rise in the core reading suggests producers may be trying to pass on increased costs through the price-chain as they vie to absorb rising prices which have swept through the economy.
Wholesale food costs moderated in July from the prior month to show a gain of 0.3 percent and while energy prices also eased they remained relatively high, posting a gain of 3.1 percent in July, up from a 6.0 percent jump in June.
Prices of big-ticket durable goods rose 0.6 percent last month, showing an acceleration from a 0.3 percent reading in June.
Durable goods include autos and large household appliances such as refrigerators and washing machines. The rise in durable goods prices suggests producers may be struggling to endure rising material costs.
The Fed left its key interest rate anchored at 2.0 percent earlier this month, in part as it adopted a wait-and-see approach to inflation risks.
The central bank could in theory hike interest rates to cool inflationary pressures, but its hands have been tied by a lingering housing market slump and a widespread credit crunch gripping the banking industry.
The report was issued as world oil prices tumbled further Tuesday with prices in New York falling more than one dollar to around 111.80 dollars a barrel. Oil prices have dropped dramatically from record peaks over 147 dollars on July 11.
The snapshot on producer prices came in the wake of a government survey last week which showed that consumer price hikes are also weighing on the economy. Headline consumer prices rose by the biggest margin in 17 years on an annualized basis to July.
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