(Bloomberg) -- Prices paid to U.S. producers rose in June by more than expected, indicating pressure is mounting on companies to pass along higher costs to consumers.
The producer price index for final demand increased 1% from the prior month and 7.3% from June of last year, according to data from the Labor Department on Wednesday. Excluding volatile food and energy components, the so-called core PPI also rose 1%, the most on record, and was up 5.6% from a year ago.
The median forecasts in a Bloomberg survey of economists called for a 0.6% month-over-month advance in the overall PPI and a 0.5% increase in the core figure. The annual increases were the largest in data back to 2010.
The PPI, which tracks changes in the cost of production, has accelerated at a faster pace than expected in recent months due to higher commodity prices and complications with global supply chains. Challenges in hiring skilled workers have also put upward pressure on wages.
The increases in production and labor costs help explain why the pace of consumer inflation has exceeded economists’ estimates in each of the last four months.
Consumer Prices
A report Tuesday showed the consumer price index surged in June by the most since 2008. The increase was primarily in categories associated with reopening, including hotel stays, car rentals and airfares.
Federal Reserve officials have said upward pressure on prices is likely to be transitory, but some investors worry the recent gains will lead to more persistent inflation.
The PPI report showed prices for goods increased 1.2% after a 1.5% advance in the prior month, while the cost of services rose 0.8%, the most since the start of the year. Almost 60% of the overall PPI advance was due to services, according to the Labor Department.
The increase in the costs of services reflected growth in margins received by wholesalers and retailers.
Producer prices excluding food, energy, and trade services -- a measure often preferred by economists because it strips out the most volatile components -- rose 0.5% from the prior month and increased 5.5% from a year earlier. The annual gain was the largest on data back to 2014.
In an earnings call Tuesday, packaged food company Conagra Brands (NYSE:CAG) Inc. reported a 8.6% increase in the cost of goods sold for its most recent quarter, with expectations for a rate of about 9% for fiscal year 2022.
“The bulk of this inflation can be attributed to continued increases in the cost of edible fats and oils, proteins, packaging, and transportation,” Chief Financial Officer David Marberger said on the call.