By Greg Robb, MarketWatch
Corrects the date in which wholesale prices on a year-on-year basis was last at 7.1%.
WASHINGTON (MarketWatch) — U.S. wholesale prices rose 0.3% in July as higher food costs offset another decline in energy costs, the Labor Department said Tuesday.
Analysts surveyed by MarketWatch expected a rise of 0.2% for the month.
Core producer prices, excluding volatile food and energy, rose 0.4% — higher than analysts’ expectations of a 0.2% increase.
The July gain in PPI was the largest since February. In June, the headline PPI rate had risen 0.1%, while the core rate had risen 0.2%.
The severe drought in the Midwest appears to already be hitting prices.
Wholesale food prices in July rose 0.5% for the second straight month. Corn prices rose 34.5%, the biggest rise since October 2006.
But analysts have been playing down how much higher food prices will impact inflation.
“Historically, food prices have not been a significant driver of U.S. inflation compared with energy or core prices,” said Peter Newland, an economist at Barclays Capital, in a recent research note.
Wholesale inflation has been trending lower in recent months.
In the 12 months ending in July, producer prices rose 0.5%, the smallest gain since October 2009. The annual inflation rate peaked at 7.1% in July 2011 and has been falling steadily ever since.
Minus food and energy, those prices have climbed 2.5% — the smallest year-over-year gain since June 2011. The core rate peaked at a 3.1% rate in February and has since turned lower.
Details
Energy prices fell 0.4% at the wholesale level in July, data showed.
Prices for intermediate goods fell 0.9% in July, as energy goods fell 1.6%. This offset a 1.4% gain in intermediate foods and feeds prices. Excluding food and energy, prices for intermediate goods fell 0.9%, the largest drop since December 2008.
Prices for crude goods climbed 1.8% and crude foodstuffs rose 5.2%. This was the biggest increase in crude food goods since February 2011.
In other data Tuesday, the government reported that retail sales rose a better-than-expected 0.8% in July. Read more about retail sales.
Greg Robb is a senior reporter for MarketWatch in Washington.
