US producer prices shrank unexpectedly last month after prices for energy goods fell back sharply in news that will sooth concerns over inflation, government data released today showed.
Overall finished goods prices declined 0.3 per cent versus a 0.8 per cent rise in May, posting its largest decline since it fell 0.4 per cent in May 2003.
The closely watched measure of core producer prices, which strips out food and energy costs, gained by 0.2 per cent. But on a 12-month basis, its pace crept up to 1.8 per cent compared with 1.7 per cent last month.
Over the last 12 months, overall producer prices have risen 4 per cent.
Wall Street had expected both overall PPI and the core measure to rise by 0.2 per cent on the month and the data provides a prelude to Friday's key report on consumer inflation.
The Federal Reserve, which recently raised US interest rates a quarter point to 1.25 per cent to keep inflation at bay, is scrutinising all fresh price information as it assesses the pace of monetary tightening needed as the economy powers ahead.
Energy prices fell 1.6 per cent in June with gasoline down 5.2 per cent, the largest drop for both measures since May 2003. The reversal was payback for May when energy prices had risen 1.6 per cent and gasoline advanced 5.7 per cent.
Finished food prices, another important component in the series, fell by 0.6 per cent, after rising 1.5 per cent in May.
Further back in the production pipeline cost pressures also appeared to be abating, with intermediate goods up 0.5 per cent after climbing by 1.1 per cent in May.