U.S. wholesale prices rose only slightly last month, as higher costs for food and pickup trucks offset another drop in energy prices. But overall inflation stayed mild, leaving the Federal Reserve room to take steps to boost the economy.
The Labor Department said Friday that the producer price index increased 0.1 percent in June from May. That followed a 1 percent drop in May from April. In the past 12 months, wholesale prices have risen 0.7 percent. That matches May’s pace, which was the slowest for 12 months since October 2009.
While inflation was largely tame, food prices increased 0.5 percent in June from May. The price of meat rose 3.1 percent, the biggest increase in nearly a year.
Some economists worry those costs could increase further in the coming months if a drought in the Midwest endures.
Excluding volatile food and energy costs, core prices rose 0.2 percent. A 1.4 percent rise in the cost of pickup trucks — the biggest in a year — drove core prices higher. In the past twelve months, core prices are up 2.6 percent, slightly below May’s 2.7 percent increase.
The index measures price changes before they reach the consumer.
“For now, inflation is not an issue,” said Joel Naroff, president of Naroff Economic Advisors.
Naroff noted that the drought has increased the cost of corn and soybeans. Corn is used in everything from cereals to soft drinks to animal feed. If corn prices continue to rise, consumers could ultimately pay more for most products in the supermarket.
Still, energy prices continued to fall in June. Wholesale energy prices dropped 0.9 percent in June. Wholesale gasoline costs rose, while prices for residential electric power, home heating oil, and diesel fuel all dropped.
Gas prices have tumbled more than 50 cents a gallon since peaking in early April, although they may be leveling off. On Friday, the average nationally price for a gallon of gas averaged $3.39, according to AAA. That’s a few cents higher than the previous week, but still15 cents lower than a month earlier.
With inflation low and unemployment still painfully high, the Fed could take further action to help the struggling economy.
At its June 19-20 meeting, the Fed agreed to extend a program that alters its bond portfolio to try to lower long-term interest rates. The aim is to inspire more borrowing and spending.
And minutes of that meeting show a growing number of members are open to adopting further stimulus measures, such as launching another round of bond buying. But policymakers are at odds over whether the economy needs more help now.
Since the Fed met last month, the job market’s weakness has persisted. The government said last week that hiring in June slumped for a third straight month. The economy added just 80,000 jobs, and the unemployment rate was steady at 8.2 percent.
In May, Americans didn’t increase the rate at which they spent. The benefits of cheaper gas have been offset by three straight months of weak job growth and wage increases that have barely kept pace with inflation.
Consumer spending drives roughly 70 percent of economic activity. Most economists see little change in growth in the April-June quarter from the tepid 1.9 percent annual rate in the first three months of the year. Some believe it has weakened.