updated 7/15/2005 8:46:09 AM ET 2005-07-15T12:46:09

Inflation at the wholesale level was frozen in place in June even though gasoline prices rose at the fastest pace in eight months.

Major Market Indices

The Labor Department reported that its Producer Price Index was unchanged in June following a big 0.6 percent decline in May, a month when energy prices fell sharply.

The good news on wholesale prices last month occurred because a steep decline in food prices offset a big jump in the cost of energy. Outside of food and energy, prices were well-behaved with so-called core inflation falling by 0.1 percent, the first decline since February.

In other economic news, business inventories rose a slight 0.1 percent in May as stockpiles of unsold cars at auto dealerships fell sharply. The small May increase followed a revised 0.2 percent rise in April inventories held at all levels of business.

The good news on wholesale prices followed a report Thursday that prices at the retail level were also unchanged in June. However, the report on consumer prices showed energy prices falling for a second consecutive month while the report on wholesale prices showed an increase in energy costs.

Analysts explained the difference by noting that the wholesale price report measures price pressures at an earlier point in the delivery chain before they reach the consumer. Therefore the PPI picked up a jump in energy costs that had not yet hit gasoline pumps.

Energy price pressures have increased even more since both the wholesale and retail price surveys were taken for June. Crude oil costs hit a record high above $61 per barrel in early July and gasoline pump prices rose last week to a nationwide average of $2.33 per gallon, up 10 cents from the previous week.

Those increases are expected to push inflation at both the wholesale and retail levels up in July.

For June, the rise in wholesale energy costs reflected an 8.7 percent jump in gasoline prices, the biggest increase since a 12.8 percent increast last October. Home heating oil prices rose an even bigger 13.5 percent but the costs of residential natural gas fell by 3.2 percent, the biggest decline in nearly four years. Residential electric power prices were also down.

Food costs at the wholesale level fell 1.1 percent in June, the biggest drop in 11 months. The decline was led by an 8 percent drop in beef prices and a 7.7 percent fall in pork prices, the biggest one month drop in nearly seven years.

Outside of food and energy, the 0.1 percent drop in core inflation at the wholesale level reflected a 1 percent drop in the cost of new passenger cars and a 1.7 percent decline in prices for light trucks. Both decreases were attributed to decisions by automakers to bring back attractive incentive deals.

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