Inflation flares 1.2% in July, housing starts drop
WASHINGTON -- Wholesale prices rose at the fastest annual pace in 27 years in July, the government said Monday in a report that showed inflation spreading into a wide range of goods outside of energy and food.
But a number of analysts said they expect the inflation picture to improve in coming months in light of the recent drop in the price of oil and other commodities. And a marked slowing in the global economy will make it harder for companies to pass along increased costs.
In a second report Tuesday, the Commerce Department said housing starts in July fell 11% to the lowest annual rate in more than 17 years, while building permits, an indicator of future activity, tumbled 17.7%.
"Inflation pressures have peaked," Ken Mayland, president of ClearView Economics said in a note to clients.
Joel Naroff of Naroff Economic Advisors notes it will take time, however, for price pressures to unwind, "It took a long time for the surge in commodity prices to seep into the general economy so don't expect one month of commodity price declines to suddenly turn off the inflation pump."
The producer price index, a measure of prices charged for goods by factories, farmers and wholesalers before they reach the retail level, rose a seasonally adjusted 1.2% in July following a 1.8% gain in June, the Labor Department said. Wholesale prices were up 9.8% in July from a year ago, biggest increase since 1981.
Energy prices were up 28% from a year earlier in July. Prices rose for electricity and natural gas and wholesale heating oil costs were up 80.6% from a year ago. Food prices were up 8.7% last month from July 2007.
But wholesale inflation was not limited to the usual culprits, suggesting high costs for energy and other crude products are seeping into a wide array of prices. Outside of food and energy, producer prices rose 0.7% in July following a 0.2% gain in June and the biggest monthly increase since November 2006. So-called core prices were up 3.6% from a year earlier in July, biggest gain since 1991.
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