PPI Jumps 0.5%; Inflation Fears Muted

The Producer Price Index for final demand increased by 0.5 percent in June, seasonally adjusted, the Bureau of Labor Statistics reported yesterday.

The report said final demand prices compared to an 0.4 percent increase in May and an 0.2 percent increase in April. On an unadjusted basis, the final demand index advanced by 0.3 percent for the 12 months ending in June, the largest 12-month increase since moving up 0.9 percent in December 2014.

BLS said advance in the final demand index was led by prices for final demand services, which rose by 0.4 percent. The index for final demand goods advanced by 0.8 percent. Prices for final demand less foods, energy, and trade services rose by 0.3 percent in June after declining by 0.1 percent in May. For the 12 months ended in June, the index for final demand less foods, energy and trade services increased by 0.9 percent.

Sam Bullard, senior economist with Wells Fargo Securities, Charlotte, N.C., said despite the increase, the report signaled only “modest” inflation, saying the trend remains tame.

“Although the PPI has been running below the PCE deflator, the increase suggests a pickup for the more widely watched measure,” Bullard said. “While over the past three months the PPI has increased at the strongest pace since 2011, it continues to signal fairly modest inflation.”