U.S. Producer Prices Unexpectedly Declined in June on Food Costs

Prices paid to U.S. producers unexpectedly fell in June, signaling limited inflationary pressure after a coronavirus-induced slump in demand.

The producer-price index decreased 0.2% from a month earlier after a 0.4% gain in May, Labor Department figures showed Friday. It marked the fourth decline in five months. A Bloomberg survey of economists projected a 0.4% gain in the June PPI. Excluding food and energy, the so-called core PPI dropped 0.3%.

Pricing power has diminished since the economy entered a recession in February. While demand is starting to stabilize as economies reopen around the world, companies may be reluctant to boost prices as they attempt to rekindle sales. Restrained price pressures along the production chain are seen limiting inflation at the consumer level.

Producer prices excluding food, energy, and trade services -- a measure preferred by economists because it strips out the most volatile components -- rose 0.3% from the prior month and declined 0.1% from a year earlier.

The cost of goods rose 0.2% from a month earlier as energy prices climbed 7.7%, while the 5.2% drop in food prices reflected a 27.7% slump in the cost of meat. The index for final demand services decreased 0.3%, the most since February, as margins for machinery and vehicle wholesaling shrank.

Compared with a year earlier, the PPI declined 0.8% in June for a second month.

©2020 Bloomberg L.P.

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