Inflation at the wholesale level slowed down last month, thanks to a significant decrease in energy prices, according to data released by the Bureau of Labor Statistics. The Producer Price Index, which measures the prices businesses receive for their goods and services, slowed to a 5.5% pace in June, compared to a revised 6% in May.

Energy Prices Drive the Decline

The decline in wholesale inflation was largely driven by a 1.4% drop in goods prices, the largest fall in four years. A 12% drop in gasoline prices accounted for two-thirds of the index’s overall decline. On a monthly basis, prices fell 0.3% in June, compared to a 0.6% increase in the prior month.

Excluding volatile food and energy prices, the core PPI slowed to a pace of 4.6% in June from the 4.9% pace seen in May. While the decline in energy prices provided some relief to businesses last month, it may prove short-lived due to the conflict in the Middle East, which has led to higher oil prices and upward pressure on inflation.

Impact on Businesses and Consumers

Wholesale prices do not typically translate directly into higher prices for consumers, but they can increase the likelihood that businesses will pass along some of those costs, especially if elevated expenses persist. The recent increase in oil prices is likely to put upward pressure on inflation in the coming months.

Increases in semiconductor chip prices, resulting from skyrocketing demand to meet computing capacity for artificial intelligence, are also contributing to higher costs of computers and computing equipment. Apple recently announced 10% to 15% price hikes on some of its products, citing memory chip shortages. Other electronic manufacturers are expected to follow suit.

Original reporting: KEYT (Ventura/Santa Barbara) — read the source article.