The U.S. producer price index rose up an unexpected 0.6 percent in July, biggest gain since October 2018, boosted by a sharp rise in energy prices.
Despite the rise, inflationary pressures remain extremely low. Compared with a year ago, the producer price index was 0.4 percent lower, according to data released by the Labor Department Tuesday. Prior to the pandemic, the index indicated prices were rising at around a 2 percent annual rate.
Core prices—which exclude food, fuel, and trade services—were up a seasonally adjusted 0.2 percent for the month and 0.1 percent compared with a year ago. Prices had fallen in the three months prior
The Labor Department’s producer price index is an inflation metric. While the more familiar consumer price index measures inflationary pressure by looking at prices paid by consumers, the producer price index measures what businesses receive for goods and services.
The index for final demand goods — those sold to consumers and businesses at the end of the production chain —rose 0.8 percent in July, the third consecutive move higher. Over one-third of the July increase was due a rise in the price of gasoline, which jumped 10.1 percent. In contrast, prices for
final demand foods declined 0.5 percent.
The index for final demand goods less foods and energy moved up 0.3 percent.
The gauge of prices for transportation and warehousing dropped 0.8 percent.
The index for final demand services jumped 0.5 percent in July. About 60 percent of the rise can be traced to a 0.4-percent increase in prices for final demand services less trade, transportation, and warehousing. Margins for final demand trade services, which measures changes in margins received by businesses, also moved higher, advancing 0.8 percent.
The Labor Department said that a 7.8-percent jump in the index for portfolio management was a major factor in the advance in prices for final demand services.
The indexes for machinery and vehicle wholesaling, automobiles and automobile parts retailing, machinery and equipment parts and supplies wholesaling also moved higher. On the other hand, airline prices dropped 7.0 percent.
Materials for construction rose 1.3 percent, reflecting the ongoing housing market boom as many Americans seek out suburban homes to escape city life and the confines of urban apartments.