U.S. producer prices rise sequentially in June on strong energy, services and core goods prices

U.S. final demand producer prices rose in the month of June. On a sequential basis, producer prices were up 0.3 percent, while they rose 3.4 percent on a year-on-year basis. The June rise was driven by strong energy, services and core good prices, while food prices dropped significantly. Excluding food and energy, PPI rose 0.3 percent sequentially, slightly higher than the 0.2 percent historical average monthly rise for this series. Producer prices, stripping food, energy and trade services rose 0.3 percent on a sequential basis.

Personal consumption grew strongly by 0.3 percent on sequential basis and 3 percent on a year-on-year basis. This is widely in line with the projections that June headline inflation will rise 0.2 percent sequentially and 3.2 percent year-on-year, noted Barclays in a research report. Stripping food & energy, personal consumption PPI rose 0.5 percent sequentially and 2.5 percent year-on-year.

Meanwhile, core measure of personal consumption rose 0.5 percent sequentially and 2.5 percent year-on-year. The monthly pace of rise implies that some upside surprise is likely for the forecast that core inflation will rise 0.2 percent sequentially. However, overall the annual rate of inflation for PPI and CPI continues to be sound and indicates that as the economy continues to perform better than potential and labor markets improve, inflation pressures might firm further in the coming months, stated Barclays.

Overall goods prices were up 0.1 percent sequentially, driven by the energy component. Food PPI dropped 1.1 percent. Goods, excluding food and energy rose 0.3 percent, widely in line with the recent trend. Services PPI were up 0.4 percent, underpinned by solid inflation in trade services and inflation in transportation & warehousing. Transportation cost have also been increasing strongly since the beginning of the second quarter and several business surveys have recorded a shortage of truckers and new regulations as possible explanations.

At 14:00 GMT the FxWirePro's Hourly Strength Index of US Dollar was slightly bullish at 55.5. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex