Wholesale Prices Rose In June, Breaking Run Of Good News On Inflation

New data released on Friday showed that wholesale price inflation accelerated in June, the highest rate of increase since March 2023.

It seems that the increase in PPI is an unwelcome development for the U.S. economy and its fight to curb high inflation, especially since it happened a day after a BLS announcement noted that, for the first time in four years, consumer prices fell monthly.

Economists caution, though, that monthly data, especially the figures that drove June's higher PPI, can be unstable. The unexpected jump in PPI does not necessarily indicate greater inflation pressures starting to build up.

The increase in PPI in June was attributed to a sudden rise in final demand services, particularly in trade service margins, which soared 1.9% from May. This increase offset lower goods production and energy prices, CNN reported.

"The increase was broad-based among wholesalers and retailers of fuel, autos, and other goods, but almost certainly is not the start of a resurgence in margins," wrote Ian Shepherdson, chairman and chief economist of Pantheon Macroeconomics, in a note to clients.

"The data are volatile and often revised significantly. Margins will come under increasing pressure as growth in consumer spending continues to slow," he added.

The federal government aims to reduce the annual inflation rate to 2% using the PCE index, according to Market Watch.

Economists were expecting prices to remain steady at 2.2% annually and increase by 0.1% monthly.

Usually, economists view PPI as an indicator of future retail-level inflation.

"It does not sound good, but we don't think consumers are about to be hit by a new surge in price increases just because margins are going up," said Chris Rupkey, chief economist at FwdBonds, in an email to CNN Business.

"These margins are notoriously difficult to measure, and wholesalers do have their own costs to cover," he added.

The core PPI jumped 0.4% for the month, and annually, it rose by 3%, the highest increase since April 2023.

According to Rupkey, the PPI in June does not reflect a change in the slowing trajectory of inflation.

"Inflation still looks to be dying on the vine largely because commodities and goods price increases have moderated," he added.