July 6, 2022

Food and Gas Drove Wholesale Prices Up in May

In addition, the Labor Department reported that a rise in food and gas costs drove a measure of wholesale prices up sharply in May. But outside those volatile categories, inflation was mild.

The department also said on Friday that the producer price index rose 0.5 percent in May from April. Gas prices rose 1.5 percent last month, and food costs increased 0.6 percent.

Confidence in the economy has fallen in June to a lower level than economists estimated, according to the Thomson Reuters/University of Michigan survey.

Scott King, senior fiduciary investment adviser at Unified Trust in Lexington, Ky., said that investors were disappointed on Friday by the decline in consumer confidence. He described the economy as “plodding along.”

“Wage growth continues to be pretty meager, and unemployment continues to be lackluster,” Mr. King said.

The Federal Reserve said on Friday that factory production rose just 0.1 percent in May from April, a sign that manufacturing was providing little support for the economy. Output fell 0.4 percent in April and 0.3 percent in March.

Factories produced more autos, computers and wood products last month, offsetting declines in the production of furniture and primary metals.

Manufacturing output has risen 1.7 percent in the last 12 months.

“Manufacturers are still struggling to cope with the ongoing weakness of global demand,” said Paul Dales, senior U.S. economist at Capital Economics.

In wholesale prices, the increase last month came after a 0.7 percent decline in April and a 0.6 percent drop in March, both of which were driven by steep declines in gas prices.

Core prices, which exclude food and energy, rose 0.1 percent in May. That matches the April increase. The index measures price changes before they reach the consumer.

“There really is not much inflationary pressure in the economy,” Mr. Dales said in a note to clients.

Aside from sharp swings in gas prices, consumer and wholesale inflation has increased very slowly in the last year. Both the overall and core indexes have risen just 1.7 percent in the 12 months ending in May. That is less than the Federal Reserve’s 2 percent inflation target, allowing the Fed more latitude to pursue its aggressive policies to spur greater economic growth.

The combination of modest economic growth and high unemployment has kept wages from rising quickly, making it harder for retailers and other businesses to raise prices.

Most of the May increase in food costs stemmed from a 41.6 percent rise in the cost of eggs, the biggest on record. The increase reflected soaring demand in the United States and overseas. The Memorial Day and Mother’s Day holidays, popular occasions for brunch, spurred more demand in the United States, a department spokesman said. And Mexico imported more eggs from the United States in response to a bird flu epidemic.

Nearly two-thirds of the 0.1 percent increase in core prices was caused by a 0.4 percent rise in the wholesale cost of pickup trucks. The housing recovery has created more business for landscapers and contractors, who have bought more trucks.

Article source: http://www.nytimes.com/2013/06/15/business/food-and-gas-drove-wholesale-prices-up-in-may.html?partner=rss&emc=rss

As Costs Fall for Energy, Prices Drop for Producers

The Bureau of Labor Statistics report showed that its index of wholesale prices fell 0.4 percent in June, after a rise of 0.2 percent in May. The decline last month was the steepest since February of last year and exceeded analysts’ forecasts of a 0.2 percent drop.

The 2.8 percent decrease in energy prices was the largest drop in that category since a 4.7 percent decrease in July 2009. Prices for gasoline, which had been rising in the first part of the year partly because of turmoil in Arab oil-producing countries, moved down 4.7 percent, the department said. The decline in energy prices more than offset the rise in food, which was up 0.6 percent in June.

When the volatile food and energy prices are extracted from the overall index, the core Producer Price Index rose 0.3 percent in June after a 0.2 percent increase in May, making it the seventh consecutive monthly rise.

The core index has risen 2.4 percent in the last year, the government report said.

That the core price index rose was “somewhat of a relief,” especially to the Federal Reserve, said Cliff Waldman, an economist for the Manufacturers Alliance. “It is a sign we have gotten out of the deflationary danger zone.”

The Federal Reserve chairman, Ben S. Bernanke, said on Wednesday that a renewed threat of deflation was one condition that could cause the central bank to resume its economic aid campaign, called quantitative easing.

The data on producer prices was one in a series of reports on Thursday that showed the state of the economy.

In the week ended July 9, the number of initial claims for unemployment benefits was 405,000, a decrease of 22,000 from the revised figure of 427,000 in the previous week, according to the Department of Labor.

Economists said that over all the decline in the weekly number was a positive sign, at least for one week.

But a better gauge, they said, is the four-week average, which also fell but remained above 400,000, a benchmark for job growth.

“The rule of thumb is that whenever you have the four-week moving average that goes under that number, that usually is a sign associated with payroll growth,” said Gregory Daco, the principal United States economist for IHS Global Insight.

So despite the most recent week’s decline, the current numbers are “still indicating some weakness in the unemployment market,” he said.

The Department of Commerce reported that retail sales in the United States rose 0.1 percent in June, after a decline of 0.1 percent in May. The increase was partly a result of a rise in auto prices.

“On the auto retail sales side of things, it seems that the supply chain disruptions emanating from the mid-March earthquake in Japan are probably easing,” said Chris G. Christopher Jr., the senior principal economist for IHS Global Insight, in a research note.

Over all, he said, the economy still has a number of pressure points. Unemployment rose to 9.2 percent in June, according to the latest government report. The stock market is volatile, consumer confidence is depressed and home prices are still scraping the bottom.

“Consumers are fatigued,” he wrote. “The only real good news on the consumer side of the economy is that gasoline prices started to fall, but are still relatively high.”

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Energy Costs Lift Retail Sales and Producer Prices

Retail sales rose 0.5 percent in April, after a 0.9 percent increase in March. Excluding a 2.7 percent jump in gasoline sales reflecting higher prices, the increase in retail sales was a much smaller 0.2 percent.

Gasoline pump prices have been surging in recent months, with the nationwide average hovering near $4 a gallon. Economists are worried that higher fuel costs will leave motorists with less money to spend on other items, and that will slow the overall economy.

Sales at gasoline stations, which made up about 10.5 percent of total sales in April, increased 2.7 percent after rising 4.1 percent in March.

Higher energy costs helped push up prices paid by companies for raw materials and factory goods in April.

The Labor Department said that the Producer Price Index, which measures price changes before they reach the consumer, rose 0.8 percent last month. That was slightly above the 0.7 percent gain in March. Excluding the volatile food and energy categories, the core index increased 0.3 percent, the same as in March.

Over the last 12 months, the index has increased 6.8 percent, the biggest gain in nearly three years. Outside of food and energy, prices rose 2.1 percent, up from a 1.9 percent gain in March.

Turmoil in the Middle East and rising demand from fast-growing developing countries have pushed up the price of oil and gas since last summer. The prices of corn, wheat, cotton and other commodities have also increased because of strong global demand. That has raised worries among some economists that consumer prices could also rise and inflation could surge.

But some signs in recent days suggest that inflation pressures could cool in the coming months. Oil prices dropped on Thursday to nearly $96 a barrel on expectations that global demand would slow this year. The price was about $114 a barrel last week. Prices of corn and other grains fell on Wednesday.

Paul Dales, an economist at Capital Economics, said higher energy and agricultural commodity prices could push the 12-month increase in the Producer Price Index to 8 percent in the coming months. But he said it would be a temporary spike.

“With commodity prices now falling, both producer and consumer price inflation are likely to drop sharply in the second half of the year,” Mr. Dales said.

A separate report from the Labor Department showed that the number of people applying for unemployment benefits dropped last week, reversing nearly all the sharp rise reported the previous week.

The number of laid-off workers seeking benefits dropped 44,000, to a seasonally adjusted 434,000. That was the steepest weekly fall since February 2010.

The drop suggests that the increase of 47,000 reported last week was mostly because of temporary factors. Still, the latest applications figure is far above the 375,000 level typically consistent with sustainable job growth. Weekly applications peaked during the recession at 659,000.

The four-week average of claims, a less volatile measure, rose to 436,750, its fifth consecutive increase. The average has increased 46,500, or nearly 12 percent, since early April.

Many economists say a brighter outlook for hiring should blunt the impact of inflation. Companies have added 250,000 jobs each month, on average, in the last three months, the biggest hiring spree in five years. The unemployment rate has dropped nearly a full percentage point in the last five months.

More jobs are critical to increasing consumer spending, which accounts for about 70 percent of the economy.

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