U.S. Producer Prices Rose Slightly in June -- Update

By Sarah Chaney Features Dow Jones Newswires

A gauge of U.S. business prices ticked up in June, another signal of moderating inflation pressures.

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The producer-price index for final demand, which measures changes in the prices that U.S. companies receive for their goods and services, increased a seasonally adjusted 0.1% in June from a month earlier, the Labor Department said Thursday. The month-over-month increase was slightly higher than economists expected, but overall, price pressures continued to remain soft in June.

The index for core prices, which excludes the often-volatile prices for food and energy, rose 0.1% in June. From a year earlier, core prices were up 1.9%, below the pace seen in previous years and suggesting little momentum for price pressures.

"In short, fairly tame and fairly close to expectations, although the core measures still show a pickup in the past year, in contrast to the pattern in the (consumer-price index and personal-consumption expenditures) data," said Jim O'Sullivan, chief economist at High Frequency Economics, in a note to clients.

Producer prices don't necessarily directly translate into what consumers pay, but in general, PPI readings follow the same trends as other major inflation gauges.

The personal-consumption expenditures price index, the Fed's preferred inflation gauge, rose 1.4% in May from a year earlier, the Commerce Department previously reported. That was a slowdown from a 2.1% annual increase in February, the first time in five years the index's annual increase poked above the Fed's 2% annual inflation target.

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Inflation remaining persistently below the Fed's target could present a challenge to policy makers considering when next to raise the central bank's benchmark rate. Fed officials have raised the rate twice this year, and have penciled in one more increase, though no move is expected at a meeting later this month.

The unemployment rate, 4.4% last month and near a 16-year-low, has only resulted in modest wage inflation.

Fed Chairwoman Janet Yellen said in congressional testimony Wednesday it would be premature to judge that the economy was not on the path to 2% inflation over the next couple of years, reiterating her view that an increasingly tight labor market would put upward pressure on wages and prices. Still, she noted the Fed would change course if inflation continued to illustrate weakness.

"We're watching this very closely and stand ready to adjust our policy if it appears that the inflation undershoot will be persistent," Ms. Yellen said.

The Labor Department's producer-price index report can be accessed at: http://www.bls.gov/news.release/ppi.nr0.htm

Write to Sarah Chaney at sarah.chaney@wsj.com

(END) Dow Jones Newswires

July 13, 2017 10:36 ET (14:36 GMT)