Producer prices unexpectedly rise in June

WASHINGTON, Fri Jul 13, 2012 – Producer prices unexpectedly rose in June despite big drops in energy prices, a sign that some inflation pressures could keep the Federal Reserve on guard.
The Labor Department said on Friday its seasonally adjusted producer price index rose 0.1 percent last month. Analysts polled by Reuters expected the index to drop 0.5 percent.
The increase was driven by gains in consumer goods like household appliances, light trucks and pet food.
That led so-called core inflation, which strips out more volatile food and energy prices, to rise 0.2 percent, in line with expectations.
While overall inflation has cooled recently, core inflation has held at higher levels. Some policymakers at the Fed worry that further moves to lower borrowing costs could fuel higher inflation, though the central bank has said it was ready to do more to help the economy if needed.
Energy prices dropped 0.9 percent in June, dragged down by a record drop in prices for residential electric power, which fell 2.1 percent. Diesel fuel prices sank 8.8 percent.
The fall in energy prices is likely to help the economy as lower costs for fuels and other input prices leave companies more money to spend on other things, such as equipment or even hiring.

Starbucks raises prices averaging 1 percent in Northeast and Sunbelt

SEATTLE ― Starbucks Corp. raised prices by an average of about 1 percent in the Northeast and Sunbelt regions on Tuesday, a move affecting cities such as New York, Boston, Washington, Atlanta, Dallas and Albuquerque.

Shares of Starbucks, which boosted prices in some other U.S. markets in November, climbed 2.2 percent to a new high of $47.04 in early morning Nasdaq trading.

Starbucks expects high costs for items such as coffee, milk and fuel to cut into profits this year and — along with restaurant operators ranging from Chipotle Mexican Grill to McDonald’s Corp. — is raising prices to help offset some of that cost pressure.In New York City, prices for 12-ounce “tall” brewed coffees and latte drinks will go up 10 cents. Prices on about half a dozen other beverages also will increase, Starbucks spokesman Jim Olson told Reuters.

The world’s biggest coffee chain raised prices on some drinks in California and South Florida in November. Those regions are not affected by the Tuesday pricing action.

Olson said the price for a 16-ounce “grande” brewed coffee, Starbucks’ most popular beverage, remains the same across the United States and has not changed since January 2011. The price for grande lattes is unchanged in most markets, he added.

The Seattle-based chain has not made across-the-board price increases since 2007, choosing instead to adjust prices on a market-by-market basis.

Starbucks said its pricing decisions are based on multiple factors, not just the price of coffee, which has eased lately.

“These adjustments are the result of balancing the cost of doing business with competitive dynamics in these markets,” Olson said.

Starbucks’ cost of doing business includes expenses related to distribution, store operations and commodities, including fuel and ingredients for food and beverages, he said.

The company is also busy remodeling about 1,700 cafes.

Starbucks caters to a somewhat higher-income customer, and recent price increases prompted no apparent pushback.

In the fiscal fourth quarter, global sales at cafes open at least 13 months jumped 9 percent, better than the 6.5 percent gain analysts, on average, expected according to Thomson Reuters data.

Customers visited Starbucks cafes more often during the quarter and spent more money when they did. Same-restaurant sales at U.S. cafes, which account for about four-fifths of its revenue, rose 10 percent.

The company previously said it expects costs for commodities such as coffee and milk to reduce fiscal 2012 earnings by about 21 cents per share. Despite that, it has forecast a profit of $1.75 to $1.82 per share this year, which would represent profit growth of as much as 20 percent over fiscal 2011.

Gasoline boosts producer prices, seen as temporary

WASHINGTON ― Producer prices rose at their fastest pace in five months in September as the cost of gasoline surged, but a small gain in core prices suggested the increased price pressure was unlikely to be sustained.

The Labor Department said on Tuesday its seasonally adjusted index for prices received by farms, factories and refineries, increased 0.8 percent after being flat in August. Economists had expected prices to increase 0.2 percent.

Stripping out volatile food and energy, wholesale prices rose 0.2 percent after inching up 0.1 percent in August.

“Slower growth abroad suggests further moderation in demand for raw materials heading into the fourth quarter, which will likely translate into inflation moderation,” said Lindsey Piegza, an economist at FTN Financial in New York.

Prices for U.S. government debt trimmed gains on the data.

The dollar briefly pared gains against the euro, while stocks on Wall Street were lower as investors focused on Moody’s warning on France’s credit rating and slow growth in China.

Gasoline prices jumped 4.2 percent, the largest gain since March, after dropping 1 percent in August.

Economists, however, dismissed the spike in gasoline, saying it was attributed to how the data was adjusted to try to smooth seasonal volatility.

“It probably did not point to a new trend to higher inflation,” said Gary Thayer, chief macro strategist at Wells Fargo Advisors in St. Louis, Mo.

But some said there was a risk that data on Wednesday could show an upside surprise in September consumer prices.

The consumer price index likely rose 0.3 percent last month, according to a Reuters survey, after increasing 0.4 percent in August.

The strong rise in wholesale prices last month is unlikely to spark a broad increase in inflation pressures given the weak economic environment.

It will probably have little impact on the Federal Reserve, which focuses on core consumer inflation, as it weighs further options to help the anemic recovery and pull down an unemployment rate stuck above 9 percent.

Pressure on the U.S. central bank for further monetary stimulus has lessened in recent weeks as retail sales and the trade balance data suggested economic growth accelerated in the third quarter after the second quarter’s tepid 1.3 percent annual rate.

Economists estimate gross domestic product grew at an annual pace of anywhere between 2.3 percent and 2.7 percent in the third quarter.

The economy’s improving tone is starting to filter through to the ailing housing market. Home-builder sentiment rose this month to its highest level in nearly 1½ years  , the National Association of Home Builders said in a separate report.

The NAHB/Wells Fargo Housing Market index rose to 18, the highest level since May 2010, from 14 in September. Economists had expected the index to only rise to 15.

Still it remained below 50, meaning more builders view market conditions as poor.

Last month, food prices rose 0.6 percent, slowing from a 1.1 percent rise in August.

In the 12 months to September, producer prices increased 6.9 percent, accelerating from August’s 6.5 percent advance.

Wholesale prices outside of food and fuel were bumped up by a 0.6 percent rise in light motor trucks — accounting for a third of the rise in the core PPI measure. Light trucks had risen 0.1 percent in August.

Passenger car prices fell 0.5 percent after slipping 0.4 percent in August. Disruptions to production wrought by the March earthquake in Japan caused car prices to spike early this year.

In the 12 months to September, core producer prices rose 2.5 percent after increasing by a similar margin the prior month. The rise was above economists’ expectations for a 2.4 percent advance.

Gasoline boosts producer prices, seen temporary