Wholesale Prices Inch Up; Retail Sales Soar
U.S. wholesale prices rose slowly but steadily in May, and retail sales boomed at the fastest clip in three months, the government said Friday, amid growing worry that higher interest rates lie ahead.
Analysts said a quickening pace of global economic activity was erasing the benefits of falling oil and other commodity prices that the U.S. economy has enjoyed while confident consumers remained on a spending spree.
Consumer sentiment remained high in June, according to an analyst with access to the University of Michigan’s preliminary report.
The producer price index, which measures prices paid to the nation’s factories, farms and refineries, rose 0.2% last month, after pickups of 0.5% in April and 0.2% in March, the Labor Department said.
Stripping out volatile food and energy costs, the core PPI was up only 0.1% in April and again in May and was flat in March, suggesting no immediate problem with prices.
Retail sales jumped 1% in May, the strongest surge in three months, the Commerce Department said. The department also revised April’s gain to 0.4%.
The report heightened concern that the Federal Reserve might soon cool demand by raising official interest rates.
The University of Michigan’s consumer sentiment index rose to 109 from 106.8, according to the preliminary June report.
While the overall producer price rise was muted in May after an energy-induced April spike, the component that measures crude goods prices jumped 5.5% for its biggest monthly increase in nearly 2 1/2 years, since a 6.1% rise in December 1996.
The energy component of the monthly PPI actually was unchanged in May after a 5.1% jump in April. After shooting up a record 29.1% in April, gasoline prices fell 2.7% last month.
Oil producers inside and outside the Organization of Petroleum Exporting Countries agreed earlier this year to curb production in order to force prices up.
Asian economies such as Japan’s that suffered recession in recent years show signs of revival and, on Friday, even Thailand said it foresaw growth at about 3% in its economy next year. Thailand was the first Asian country to be struck by a financial crisis in 1997 and, as it and others resume growing, oil demand and prices are likely to pick up.
Domestic demand, reflected in soaring retail sales, remained robust in May and offered little or no sign of a significant slowing in consumer-driven expansion.
Sales of new cars rose 2.5% to $60.45 billion in May, after a drop of 0.8% in April, the Commerce Department said. Excluding the auto sector, which accounts for about a quarter of overall business, May retail sales rose 0.5%. May sales at department stores selling general merchandise rose 0.9% to $31.78 billion, more than reversing April’s 0.3% drop.
