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Deflation ensured as even food costs plunged

SPX News by Newsroom on 10:15 July 10, 2020 EST

US wholesale prices dropped 0.2% in June reflecting a 5.2% decline in food costs which helped to offset a 7.7% jump in energy prices the Labor Department reported Friday. The price of gasoline jumped 26.3%. The price of services fell sharply although hospital inpatient care rose by 0.8%, likely reflecting the added pressures on a hospital system burdened by dealing with a surge in coronavirus cases.

The drop in the Producer Price Index, which measures inflation pressures before they reach consumers, followed a 0.4% gain in May. Wholesale prices have fallen in four of the past five months.

The country has been pushed into a deep recession that is expected to lead to an unprecedented contraction of the economy in the April-June quarter. It is likely the downturn, triggered by the coronavirus pandemic, will keep inflation muted.

Over the past year, wholesale prices have fallen 0.8%. Core wholesale prices, which exclude food and energy, were down 0.3% in June and up a tiny 0.1% over the past year.