U.S. WHOLESALE INFLATION POSTED A BETTER-THAN-EXPECTED READING IN JUNE AS BOTH ENERGY AND FOOD COSTS DECLINED, THE GOVERNMENT SAID TUESDAY. THE LABOR DEPARTMENT REPORTED THAT ITS PRODUCER PRICE INDEX (PPI) FELL BY 0.2 PERCENT LAST MONTH, THE FIRST DECLINE SINCE A 0.6 PERCENT DROP IN JANUARY. SINCE THEN, WHOLESALE PRICES HAD BEEN POSTING SIGNIFICANT GAINS, REFLECTING THE FACT THAT GASOLINE SURGED TO RECORD LEVELS AND FOOD COSTS HAVE BEEN RISING BECAUSE OF HEAVY DEMAND FOR CORN TO USE TO PRODUCE ETHANOL. BUT IN JUNE, ENERGY PRICES FELL 1.1 PERCENT AND FOOD PRICES DROPPED BY 0.8 PERCENT, THE REPORT SAID. “CORE” WHOLESALE INFLATION-WHICH EXCLUDES VOLATILE ENERGY AND FOOD PRODUCTS-ROSE BY A HIGHER-THAN-EXPECTED 0.3 PERCENT IN JUNE, ALTHOUGH MOST OF THAT GAIN REFLECTED AN INCREASE IN CAR PRICES. EXCLUDING THE INCREASE IN CARS, CORE INFLATION WOULD HAVE POSTED A 0.1 PERCENT RISE. THROUGH THE FIRST SIX MONTHS OF THIS YEAR, WHOLESALE PRICES HAVE BEEN RISING AT AN ANNUAL RATE OF 6.4 PERCENT, A SHARP ACCELERATION FROM A FLAT READING FOR THE FINAL SIX MONTHS OF 2006. HOWEVER, MOST OF THE RISING PRICE PRESSURES REFLECTED A SPIKE IN ENERGY COSTS, WHICH EASED SOMEWHAT IN JUNE. GASOLINE PRICES, WHICH HIT A RECORD $3.227 A GALLON (3.8 LITERS) IN LATE MAY, FELL STEADILY IN JUNE AND EARLY JULY BEFORE RISING AGAIN IN RECENT WEEKS OVER RENEWED CONCERNS ABOUT U.S. REFINERY PROBLEMS. HOWEVER, THAT REBOUND IS EXPECTED TO BE TEMPORARY AS REFINERIES GET BACK TO FULL PRODUCTION. GASOLINE PRICES AT THE WHOLESALE LEVEL FELL BY 3.9 PERCENT IN JUNE, THE BIGGEST DROP SINCE A 13 PERCENT DECLINE IN JANUARY. OVERALL ENERGY COSTS WERE DOWN 1.1 PERCENT LAST MONTH AS ELECTRIC POWER AND LIQUEFIED PETROLEUM GAS BOTH FELL WHILE NATURAL-GAS PRICES ROSE. OVERALL, WHOLESALE PRICES HAD RISEN BY MORE THAN 1 PERCENT IN BOTH FEBRUARY AND MARCH AND THEN 0.7 PERCENT IN APRIL AND 0.9 PERCENT IN MAY. FEDERAL RESERVE (FED) CHAIRMAN BEN BERNANKE IS SCHEDULED TO DELIVER THE CENTRAL BANK'S MID-YEAR ECONOMIC FORECAST TO CONGRESS ON WEDNESDAY. FINANCIAL MARKETS EXPECT HE WILL CONTINUE TO SIGNAL THAT INTEREST RATES, WHICH HAVE NOT BEEN CHANGED FOR MORE THAN A YEAR, WILL REMAIN STEADY FOR PERHAPS THE REST OF THE YEAR. THE FED CONTINUES TO BELIEVE THAT THE BIGGEST RISK TO THE ECONOMY IS THE THREAT OF INFLATION, BUT IT IS WATCHING TO SEE WHETHER THE ECONOMIC SLOWDOWN IT HAS ENGINEERED WILL BE ENOUGH TO EASE PRICE PRESSURES.
