US sees producer prices rise in June

US producer prices increased slightly more than expected in June amid gains in the cost of services and motor vehicles, leading to the biggest annual increase in 6-1/2 years.

The report published by the Labor Department yesterday also showed a pickup in underlying producer inflation last month. The data supports views of steadily rising price pressures, which will probably allow the Federal Reserve to increase interest rates two more times this year.

Tariffs imposed by the Trump administration on imports of lumber, steel and aluminum pushed up prices last month.

“Tariffs are negative for economic growth but they are also inflationary,” said John Ryding, chief economist at RDQ Economics in New York. “We expect these price pressures will flow through into higher core inflation at the consumer level as the year unfolds.”

The producer price index for final demand added 0.3 percent last month after rising 0.5 percent in May. In the 12 months through June, the PPI rose 3.4 percent, the largest gain since November 2011. Producer prices added 3.1 percent year on year in May.

Economists polled by Reuters had forecast the PPI gaining 0.2 percent in June and rising 3.2 percent year on year.

A key gauge of underlying producer price pressures that excludes food, energy and trade services rose 0.3 percent last month. The socalled core PPI edged up 0.1 percent in May.

In the 12 months through June, the core PPI rose 2.7 percent after adding 2.6 percent in May.