- THE MAGAZINE
The advance in the Producer Price Index, which measures price pressures before they reach consumers, came after wholesale prices dropped by 0.2 percent and 0.4 percent in April and May, respectively, the Labor Department reported Thursday. Even with June's small increase, the report suggested that inflation remains under control.
In another report, new claims for unemployment insurance shot up last week by a bigger-than-expected 16,000 to a seasonally adjusted 403,000, the highest level since May 25, the departmeent said. It marked the first increase in three weeks.
Economists predicted claims would move higher in part because auto plants temporarily shut down around this time each year to retool for new models. Some textile plants often temporarily close in July, they said. The more stable four-week moving average of claims, which smoothes out weekly fluctuations, edged up to 395,000 last week, suggesting that the job market continues to be sluggish.
With mediocre job creation in June, the nation's unemployment rate moved up a notch to 5.9 percent. In the inflation report, the reading for the overall PPI reading in June matched analysts' expectations.
However, after being flat in May, the "core" rate of wholesale inflation — which excludes energy and food prices — rose 0.2 percent in June. That was slightly faster than the 0.1 percent rise many analysts were forecasting. Still, for the 12 months ending June, wholesale prices fell by 2.1 percent. Falling prices can offer some good deals for consumers. But for companies whose product prices are doing down, it means more pressure on already pressed profit margins.
In June energy prices were flat, after dropping by 2.3 percent in May. Car prices increased 0.4 percent. With inflation remaining tame, the Federal Reserve will have leeway to hold interest rates steady at 40-year lows. The Fed cut short-term interest rates 11 times last year to rescue the economy from recession. But at the Fed's four meetings this year, it has opted to leave rates unchanged, citing concerns about the recovery's vitality.
Economists worry that higher unemployment, a sour stock market and a stream of accounting scandals could make consumers and businesses less willing to spend and invest, slowing the recovery even more.