US producer prices rose modestly last month, but core producer prices climbed more than expected and retail sales - excluding petrol - slowed, according to the latest government reports which signaled possible inflation pressures.
Analysts said the rise in core producer prices shows the risk that rising prices may be working their way from producers to consumers. US producer prices rose just 0.2% last month as food costs fell, but prices outside of food and energy rose a steeper-than-expected 0.3%, the Labor Department said.
Despite the stiffer-than-expected monthly rise in producer prices outside of food and energy, the 12-month gain held steady at the 1.5% increase seen in April, which could help temper inflation concerns.
Energy costs rose 0.4% in May, a much slower pace of advance than in March or April, when they rose 1.8% and 4%, respectively. Residential natural gas prices slid 3.1%, the fourth straight monthly decline. The drop helped offset a 2.2% gain in petrol prices, a 5.1% jump in the cost of liquefied petroleum gas and a 2.6% increase in home heating oil.
Food costs fell 0.5%, helping to restrain the advance in overall producer prices.
The report showed prices for capital goods rose more quickly than for nonfood, non-energy consumer goods. Capital equipment prices were up 0.3% last month, while core consumer goods prices rose just 0.2%. Pharmaceutical prices shot up 1.9%, the cost of heavy trucks rose 1.4% and communication equipment costs advanced 0.4%. Car prices, however, dropped 0.4%.
Intermediate goods prices rose 1.1%, both overall and excluding food and energy, while crude goods prices rose 2%. Core crude goods prices climbed 6.2%.
In a separate report, the Commerce Department said that sales at US retail stores rose 0.1% in May, as expected, as strong petrol sales outweighed declines in car, furniture and building material sales.
The Commerce Department said sales at petrol stations climbed 1.9%, following an upwardly revised 5.5% rise in April, as higher energy prices inflated prices at the pump. When petrol sales were stripped from the number, sales fell 0.1%. Retail sales at petrol stations were up 21.9% from May 2005.
Meanwhile, motor vehicle and parts sales fell 1.6%, the largest drop since February. Excluding cars and parts, retail sales rose 0.5%, in line with expectations. When cars, parts, and petrol were excluded, retail sales rose 0.3%.
Furniture and home furnishing store sales dipped 0.5% but were up 7.4% from a year earlier. Sales at building materials and garden equipment stores fell 0.4%.
Consumer spending accounts for two-thirds of US economic activity and analysts worry that higher energy prices, which act like a tax on households, are hitting consumption.
