US wholesale prices shoot up 3.4 percent over past year

FILE- In this Friday, June 29, 2018, file photo, Colin Hinshaw with Hilco Transport INC. in Greensboro, fills the fuel storage tanks at the Pick N Go gas station in High Point, N.C. On Wednesday, July 11, the Labor Department reports on U.S. producer price inflation for June. (Laura Greene/The High Point Enterprise via AP, File)

WASHINGTON — U.S. wholesale prices rose 0.3 percent in June, a slight slowing from May. But the 12-month gain was the fastest in more than six years, adding to evidence that inflation is beginning to rise after years of weak price gains.

The Labor Department said Wednesday that the June increase in its producer price index — which measures inflation pressures before they reach the consumer — followed a 0.5 percent rise in May. The deceleration reflected a big drop in food costs in June and a much smaller increase in energy prices.

However, wholesale prices over the past 12 months have surged 3.4 percent. That marks the largest 12-month gain since a 3.7 percent rise in the 12 months ending November 2011.

The acceleration in wholesale prices is evident in various other price gauges. The government will report on June consumer prices Thursday, but the 12-month increase through May showed a gain of 2.8 percent. An inflation gauge favored by the Federal Reserve has finally reached the Fed's 2 percent target for annual increases after six years of undershooting it.

The central bank in June boosted its key interest rate for a second time this year and signaled that it expected to raise rates a total of four times in 2018. While overall prices have finally begun to rise, wage gains so far have remained modest. But economists believe with unemployment at a low 4 percent, wage increases should begin to accelerate.

The Fed is expected to keep boosting its benchmark interest rate at a moderate pace unless it sees signs that inflation and wage gains are starting to rise too quickly, a development that would prompt faster Fed rate hikes to keep the economy from overheating.

For June, core inflation at the wholesale level was up 0.3 percent and 2.8 percent over the past year.

Energy costs rose 0.8 percent in June on top of a much more rapid 4.8 percent surge in May. Food costs, however, fell by 1.1 percent, led by a 13.8 percent drop in the price of vegetables.

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