Wholesale prices have been rising at a higher rate than any time in the last 27 years. This follows the report last week that consumer prices are rising at the fastest pace since 1991.
The U.S. Labor Department released a report Tuesday saying wholesale inflation surged in July with prices rising at the fastest pace in 27 years. Wholesale prices shot up 1.2 per cent in July because of rising costs of energy, motor vehicles and other products. This number is twice more than what was predicted by economists.
The core prices, which don’t include food and energy, also rose 0.7 per cent, the biggest climb since November 2006.
This news is coupled with bad reports in the U.S. housing market; the Commerce Department reported housing construction fell in July to the lowest levels in more than 17 years. When the housing market declines, it drags a whole set of furniture and electronic industries along with it. This year, builders reported 965,000 new housing units, the lowest number since 1991. It will decline further with rising mortgage foreclosures and falling demand.
Price increases were a direct cause of the big surge in energy costs which saw a record price of $147.27 per barrel of oil. Since then, gas prices have fallen. But because of prolonged increases in gas prices, businesses are still affected by it.
Sal Guatieri, an economist at BMO Capital Markets expects the inflation at both the business and consumer levels to stay high for another month or so. Guatieri told AP:
“A firmer dollar, retreating commodity prices and continued economic weakness should damp inflation by the fall.”
Prices may see a dip soon, while gas prices are slowly increasing because of the weak value of the dollar against the Euro.
As MSNBC reports:
For July, wholesale energy prices jumped by 3.1 percent following a 6 percent gain in June. That increase reflected big jumps in the price of natural gas, home heating oil and liquefied petroleum gas, which offset a 0.2 percent dip in gasoline costs. Food prices rose by 0.3 percent in July after a 1.5 percent surge in June. Beef prices jumped by 7.4 percent, the biggest increase in nearly four years. Milk prices shot up by 5 percent, the biggest gain in a year, while soft drink prices rose by 2.4 percent, the largest increase in four years.