WASHINGTON -- Wholesale prices in the U.S. unexpectedly were little changed in July, reflecting the biggest drop in auto costs in four years.
The steady reading in the producer price index followed a 0.8 percent gain in June, a Labor Department report showed Wednesday in Washington. The median estimate in a Bloomberg survey of 73 economists projected a 0.3 percent rise. The so-called core measure, which excludes volatile food and fuel, climbed less than forecast.
Lower prices for raw materials are weighing on cost pressures at the production stage as slower growth abroad restrains demand. Federal Reserve policy makers continue to see inflation running below the central bank’s 2 percent goal even as the expansion picks up in the second half of the year.
“Inflation should gradually pick up, but it’s still going to be relatively low,” said Scott Brown, chief economist for Raymond James & Associates Inc. in St. Petersburg, Fla., who correctly projected the rise in core prices. “There’s still a lot of slack in the economy.”
Stock-index futures held earlier losses after the report. The contract on the Standard & Poor’s 500 Index maturing in September fell 0.2 percent to 1,687.7 at 8:45 a.m. in New York.
Estimates in the Bloomberg survey ranged from a drop of 0.1 percent to a 0.8 percent increase.
Core wholesale prices increased 0.1 percent last month, less than the 0.2 percent advance that was the median forecast of economists surveyed.
Compared with the same month a year earlier, companies paid 2.1 percent more for goods. The core index increased 1.2 percent in the 12 months ended in July, the smallest year-to-year gain since November 2010.
The wholesale cost of passenger cars dropped 1.1 percent last month, the biggest decline since July 2009.
Energy costs decreased 0.2 percent from June as natural gas prices fell 3.9 percent, the most since February 2009.
The cost of finished consumer foods were little changed last month as a decline in fresh vegetables and beef offset a jump in potato prices.
Expenses for intermediate goods were also little changed in July, while costs for crude goods climbed 1.2 percent.
Disinflation in materials costs has kept companies such as Bedford Heights, Ohio-based Olympic Steel Inc. from raising prices amid bloated global supply.
“Until real demand returns and unless consumption increases, lower input cost will continue to impede pricing power,” David Wolfort, president and chief operating officer, said on an Aug. 9 earnings call. “Given the forward curve and consensus forecasts for lower prices, there is reluctance on behalf of steel buyers to jump back into the market and increase inventory levels at current pricing points.”
Inflation running below the Fed’s 2 percent goal hasn’t discouraged the policy makers from expectations that the expansion will accelerate.
“The committee recognizes that inflation persistently below its 2 percent objective could pose risks to economic performance, but it anticipates that inflation will move back toward its objective over the medium term,” the Federal Open Market Committee said July 31, after its most recent two-day meeting in Washington. Growth will “pick up from its recent pace.”
Producer prices are one of three monthly inflation gauges from the Labor Department. Import prices rose a less-than- forecast 0.2 percent in July, the first increase in five months, as costs of imported automobiles dropped by the most since December 1992, data showed yesterday. The consumer-price index, the broadest of the three measures, may have climbed 0.2 percent in July, economists projected ahead of the report tomorrow.
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