Producer Price Index Rises 0.5% In June

Date: July 15, 2016

Energy, Food Prices Seen As Biggest Drivers Of Gains

According to the latest Department of Labor data on the Producer Price Index, in June, the PPI increased by 0.5%, higher than the 0.4% increase seen in May and the 0.2% increase reported in April. Year-to-year, PPI was up 0.3%, the biggest 12-month increase since a 0.9% increase in December 2014. Of particular note, the PPI was highly influenced by gasoline prices, with almost half of the index for final demand goods increase coming from gasoline prices, which rose by 9.9% for the month. According to the AP, energy prices and food costs were up 4.1% and 0.9% respectively, while “core inflation, which excludes volatile food and energy” had its largest rise since January, increasing 0.4 percent in June. Over the past year, producer prices have increase 0.3%, with core inflation coming in at a “moderate” 1.3%. According to Bloomberg News, June’s increase was “more than forecast” and “paced by the biggest jump in fuel costs in a year.” The “economists surveyed by Bloomberg called for a 0.3 percent advance.” Bloomberg points out that, “As energy costs stabilize and the restraining influence of a strong dollar dissipates, a slowly improving economy will probably lead to a more sustained pickup in price pressures,” and Federal Reserve policymakers “are monitoring inflation’s progress toward their goal as they consider when to lift interest rates again.”

What This Means For Small Businesses

The rising PPI, indicating modest economic improvement, hasn’t translated into much improvement for small businesses. As the latest NFIB Small Business Economic Trends report shows, pricing continues to be weak, with “dormant” inflation. In June, 12% of small business owners “reported reducing their average selling prices in the past three months,” while 16% reported increasing prices in the past 90 days. Though “prospects for a resurgence of inflation” mean good news for consumers, this is a tough environment for small businesses. NFIB Chief Economist Bill Dunkelberg explained, “Small businesses are in maintenance mode experiencing little growth.”

Additional Reading

Reuters also covers the story.

Note: this article is intended to keep small business owners up on the latest news. It does not necessarily represent the policy stances of NFIB.

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