Wholesale Prices Rise in June on Higher Energy

Washington, DC, July 14, 2009--Higher energy prices rippled through the U.S. economy in June, helping to drive a rise in wholesale prices.

The sharp rise in wholesale prices -- as well as "core" prices that exclude food and energy -- could fan investors' fears about inflation. Economists viewed the energy cost hikes as temporary and not the beginning of a dangerous bout of spiraling prices, but said consumers likely will remain cautious as the unemployment rate ticks up.

The 1.8 percent jump in the Producer Price Index, which tracks the costs of goods before they reach store shelves, came after wholesale prices rose 0.2 percent in May, the Labor Department reported Tuesday. Last month's increase was double what economists expected.

"We don't expect to see these trends stick, especially with crude oil prices coming down," said Anika Khan, economist at Wells Fargo. "We don't see any inflation or deflation at this point."

Many analysts expect the increase in energy prices will be short-lived and that the weak economy will restrain companies from ratcheting up prices they charge consumers.

Stripping out volatile food and energy prices, all other prices rose a bigger-than-expected 0.5 percent in June, the most since October. In May, the core prices dipped 0.1 percent.

For the 12 months ending in June, core prices rose 3.3 percent.

In June, energy prices jumped 6.6 percent. Gasoline prices increased 18.5 percent, home-heating oil 15.4 percent and liquefied petroleum gas, such as propane, went up 14.6 percent. All were the biggest increases since November 2007.

Crude oil prices topped $72 a barrel in June but have eased since then. Oil prices hit a record-high of $147 a barrel last July.

Higher prices for cars, trucks, furniture and pharmaceutical preparations factored into the pickup in "core prices" in June.