US producers prices fall more than expected in June

WASHINGTON, July 15 (BestGrowthStock) – U.S. producer prices fell
for a third straight month in June, pulled down by weak food
and energy costs, according to a government report on Thursday
that supported views the Federal Reserve would maintain its low
interest rate policy well into 2011.

The Labor Department said the seasonally adjusted index for
prices paid at the farm and factory gate dropped 0.5 percent
after slipping 0.3 percent in May.

Analysts polled by Reuters had expected producer prices to
dip 0.1 percent last month.

In the 12 months to June, producer prices increased 2.8
percent after rising 5.3 percent in May. The year-on-year
increase in June was the smallest gain since November and was
below market expectations for a 3.1 percent rise.

Last month, energy prices fell 0.5 percent after declining
1.5 percent in May. Gasoline prices dropped 1.6 percent, while
food costs tumbled 2.2 percent – the largest decline since
April 2002.

Stripping out volatile food and energy costs, core
producer prices edged up 0.1 percent last month, matching
expectations, after increasing 0.2 percent in May.

A combination of weak energy prices and low rates of
resource utilization are keeping inflation subdued as the
economy struggles to recover from the most brutal recession
since the 1930s.

With domestic demand retreating and unemployment still
stubbornly high, many economists do not expect the Fed to lift
overnight interest rates, currently near zero, until at least
the second half of next year.

Last month, core PPI was lifted by a 2.5 percent surge in
the cost of heavy motor trucks, which was the largest increase
since April 2007, the Labor Department said.

In the 12 months to June, the core producer price index
rose 1.1 percent, in line with market expectations, following a
1.3 percent increase in May.

Investing Research
(Reporting by Lucia Mutikani; Editing by Neil Stempleman)

US producers prices fall more than expected in June