Inflation at the wholesale level slowed down last month, helped by a sharp drop 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 at a 5.5% pace in June, compared to a revised 6% in May.

Energy Price Drop

The decline came from 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 versus a 0.6% increase in the prior month.

Excluding volatile food and energy prices, core PPI slowed to a pace of 4.6% in June from the 4.9% pace seen in May. Wholesale prices do not typically translate one for one into higher prices for consumers, but they can raise the likelihood that businesses will pass along some of those costs, especially if elevated expenses persist.

While the decline in energy prices provided some relief to businesses last month, that could prove short-lived now that the conflict in the Middle East has reignited. After Tuesday’s similarly positive Consumer Price Index report came out, Federal Reserve Chairman Kevin Warsh said he wasn’t reading too much into it.

Impact on Businesses

Increases in semiconductor chip prices resulting from skyrocketing demand to meet computing capacity to power AI are also contributing to the 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: KTVZ (Central Oregon) — read the source article.