US producer prices grow significantly in June

Producer prices in the US rose more rapidly than anticipated last month. Most of the goods and services components registered robust increases. The headline producer price index was up 0.5 percent month-on-month, as compared with the consensus expectations of 0.3 percent in the month of June.

Producer price index, stripping energy, food and trade, rose 0.3 percent on sequential basis. The PPI’s goods component rose at a rapid rate for two straight months, due to strong contributions from food and energy prices.

Stripping energy and food, prices of goods stagnated in June. This was a less buoyant performance. Services PPI rose 0.4 percent in June, as compared with 0.2 percent rise recorded in the month of May. The strength was widespread throughout components. The producer price index inflation is consistent with projections of a gradual strengthening in the country’s pipeline price pressure.

Final demand producer price index was up 0.3 percent on a year-on-year basis, coming out of the deflationary territory. Final demand, excluding food, trade services and energy increased 0.9 percent year-on-year, as compared with May’s 0.8 percent year-on-year.

The BLS, since 2011, has reported PPI personal consumption that tracks pipeline price pressures for CPI inflation, noted Barclays in a research report. The PPI personal consumption was up 0.6 percent month-on-month and 0.2 percent year-on-year. PPI personal consumption, stripping energy and food, was up 0.5 percent on sequential basis and 1.4 percent on year-on-year basis.

Even if the PPI has been lower than the PCE deflator, the rise in the index implies a rebound for the more widely watched measure, said Wells Fargo in a research report. While the PPI has risen at the strongest rate since 2011 in the past three months, it continues to signal fairly modest inflation, according to Wells Fargo.