WASHINGTON — Wholesale prices in the United States rose 2.6% last month, a stronger-than-expected increase from a year earlier, a sign that inflationary pressures remain high.
The increase, the strongest year-on-year rise since March 2023, comes as other price indicators show inflation is continuing to ease.
The Labor Department said Friday that the producer price index, which tracks inflation before it reaches consumers, rose 0.2% from May to June after remaining unchanged the previous month. Excluding food and energy prices, which fluctuate from month to month, so-called core wholesale prices rose 0.4% from May and 3% from June 2023.
The producer price index can be an early sign of where consumer inflation is headed. Economists also watch it because some of its components, notably health care and financial services, feed into the Federal Reserve’s preferred gauge of inflation: the personal consumption expenditures (PCE) index.
Friday’s wholesale figures follow Thursday’s government report that consumer inflation cooled in June for the third straight month. Consumer prices fell 0.1% from May to June — the first decline in headline inflation since May 2020, when the economy was paralyzed by the pandemic.
In summary, this week’s price figures, along with other recent data, continue to suggest that the inflation that first gripped the country three years ago, as the economy emerged from a pandemic-induced recession that had led to large shortages and skyrocketing prices, is continuing to ease.
The Fed raised its reference rate eleven times in 2022 and 2023, to a 23-year high, to rein in price increases. Inflation has since cooled from a four-decade high of 9.1%, and the central bank is expected to begin cutting interest rates in September.
Fed rate cuts would likely lead to lower borrowing costs for mortgages, auto loans and credit cards, as well as lower corporate borrowing, over time. Stock prices could also rise as a result.
A brief surge in inflation early this year led Fed officials to scale back their rate cut expectations, with policymakers saying they would need several months of mild price increases to feel confident enough to lower their key interest rate from the highest point in 23 years.
Even though inflation is slowing by most measures, the cost of food, rent, health care and other basic necessities is still much higher than it was before the pandemic, a source of public discontent and a potential threat to President Joe Biden’s reelection campaign.
But despite persistent inflationary pressures and higher borrowing costs, the US economy remains stable, even if gradually slow down. Hiring is still solidAnd unemployment remains relatively lowgiving Americans unusual job security.