Producer Prices On The Rise

Services and metals are factors in June's producer price report where all three headline indexes -- overall, less food & energy, less food & energy & trade services -- rose 0.3 percent. Trade services, which tracks prices at wholesalers and retailers, jumped 0.7 percent in June on top of May's 0.9 percent gain. These strong increases are bound to raise eyebrows and raise the risk of inflation pass-through to the consumer.

Metals prices continue to show pressure with steel mill product prices up 1.9 in June following monthly gains of 4.3 percent, 3.2 percent and another 1.9 percent going back to March when import tariffs went into effect. Prices for aluminum mill shapes rose 2.1 percent following prior gains of 5.0, 1.8 and 2.1 percent, all very steep.

Energy also contributed to June's pressure, up 0.8 percent with gasoline 0.5 percent higher and home heating oil up 8.0 percent. Food is an offset, down 1.1 percent and reflecting a 13.8 percent plunge in vegetables and a 2.1 percent decline for food exports. Other readings in today's report include a 0.4 percent rise for cars and a 0.6 percent gain for light trucks.

Year-on-year rates are all on the climb with the headline and less & food energy rising to 3.4 and 2.8 percent respectively and with less food & energy & trade services up slightly to 2.7 percent. There are definitely signs, though limited of ones, of inflation in this report and may hint at higher-than-expected readings in tomorrow's consumer price report.