Wholesale prices accelerated again in June as inflation crept into every part of the U.S. economy, squeezing businesses and American households in the form of higher prices for most necessities. The Labor Department said Thursday that the producer price index, which measures inflation at the wholesale level before it reaches consumers, rose 11.3 percent in June from a year earlier. On a monthly basis, prices rose by 1.1%. Both of those figures are higher than the 10.7% annual and 0.8% monthly estimates from economists at Refinitiv, underscoring how strong inflationary pressures remain. Core wholesale inflation, which excludes the more volatile food and energy measures, rose 0.3% for the month, after rising 0.4% in April and May. Over the past 12 months, core prices have increased by 6.4%. Economists praised the possible slowdown in increases in core inflation, suggesting it could be a sign that consumer prices are beginning to moderate. INFLATION RAISES 9.1% IN JUNE, ACCELERATES MORE THAN EXPECTED TO NEW 40-YEAR HIGH “It’s clear that food and energy are pushing up the CPI, as was the case in yesterday’s inflation print,” said Peter Essele, head of portfolio management at Commonwealth Financial Network. “Striping out these volatile elements, the PPI appears to have peaked and is beginning to reverse, a tell-tale sign that the economy is shifting into late-cycle territory.” Overall, goods prices jumped 2.4% last month, the sixth straight rise and the largest contributor to measured inflation. Nearly 90% of June’s increase in services came from a 10% jump in prices for final demand energy, including a surprising 18.% increase in gasoline prices, according to the Labor Department. Meanwhile, the services index rose 0.4 percent in June, with increases in transportation and storage services accounting for about two-thirds of the gain. The rise in wholesale prices comes after a separate Labor Department report released Wednesday showed that Consumer price index rose 9.1% in June compared to a year ago, beating market expectations. It marks the fastest rate of inflation since December 1981. A man wearing a mask walks past the US Federal Reserve Building in Washington, the United States, on April 29, 2020. ((Xinhua/Liu Jie via Getty Images) / Getty Images) Rampant inflation has become a major political liability for President Biden ahead of November’s midterm elections, in which Democrats are expected to lose their already slim majorities. Polls show that Americans see inflation as the biggest problem facing the country — and that many households blame Biden for rising prices.
Back-to-back bad reports will likely cement a series of aggressive rate hikes from the Federal Reserve as policy makers struggle to catch up with runaway inflation. The US central bank already raised its benchmark interest rate by 75 basis points last month for the first time since 1994 and confirmed that a similarly sized increase is on the table in July. With inflation running even hotter than economists expected in June, Wall Street is now raising the odds of a big 100 basis point hike in July. About 83% of traders are now pricing in the odds of a 100 basis point hike later this month, according to CME Group’s FedWatch tool, which tracks trades. GET THE FOX BUSINESS ON THE GO BY CLICKING HERE “The likelihood of a 100 basis point hike by the Fed at the end of July has increased significantly following the two price index announcements,” Essele said. “The Bank of Canada raised interest rates by 1% on Wednesday, the first G7 country to make such a move to curb inflation this cycle, and the US is likely to follow suit.”