The Labor Department's Producer Price Index jumped 0.6 percent last month, its biggest gain since March. Boosting the index was a 5.1 percent spike in energy prices. However, the closely watched "core" PPI, which strips out volatile food and energy costs, declined 0.1 percent.
Meanwhile, led by a surge in car sales and gasoline prices at the pump, U.S. retail sales rose 0.5 percent in June, the sharpest gain since February, showing no sign of a slowdown in U.S. consumer demand.
Reinforcing evidence of strong consumer demand, the Commerce Department revised May sales to show a pickup of 0.3 percent instead of the 0.3 percent decline that it reported a month ago.
Excluding gasoline prices, retail sales were still up 0.5 percent last month after rising 0.3 percent in May, the department said. Excluding auto sales, retail sales were up 0.2 percent last month after posting a 0.5 percent gain in May.
Sales at U.S. gasoline stations rose 1.3 percent last month, up 23 percent from a year ago. But that didn't stop U.S. consumers from buying cars. Sales at automotive dealers rose 1.5 percent in June, bouncing back from a 0.3 percent decline in May to post the biggest gain since February.
Sales of building materials and of furniture weakened in June, providing some evidence that costlier interest rates may be starting to exert some drag on spending.
So far this year, wholesale prices have been rising at an annual rate of 4.8 percent, compared with a 3 percent gain for all of 1999. The pickup in this year's wholesale prices largely reflects rising energy costs.
The PPI reading will likely get the notice of Federal Reserve officials who have raised interest rates six times in the past year to stamp out inflationary pressures and are pondering what to do next.
Separately, the National Association for Business Economics, in its survey of 127 members Friday, said 33 percent reported increasing their prices in the second quarter of this year, the highest percentage in five years. In the previous quarter, 29 percent said they increased their prices.
Also in the survey 60 percent reported rising costs for materials, up from 46 percent in the first quarter.
"This is the kind of inflation that sneaks up on you," said Diane Swonk, NABE president and chief economist for Bank One Corp. "No one is getting scorched yet, but inflation is warming up."
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