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US producer price index creeps up 0.1 pct in July Manufacturing leads industrial output higher

 WASHINGTON, Aug 15, (AP): Falling gasoline costs lowered the prices that US companies received for their goods and services last month, keeping overall inflation in check.

The producer price index rose 0.1 percent in July, following a 0.4 percent gain in June, the Labor Department said Friday. The index measures the cost of goods and services before they reach the consumer.
Wholesale gas prices fell 2.1 percent, after jumping 6.4 percent in June. The cost of pharmaceuticals, pickup trucks and rail and truck shipping services rose, while the cost of vegetables, jewelry and natural gas fell.
Excluding the volatile categories of food, energy and retailer and wholesaler profit margins, prices moved up 0.2 percent.
In the past 12 months, producer prices have risen just 1.7 percent, slightly below the Federal Reserve’s target.
 
Wholesale prices jumped 0.5 percent in April, led by a big increase in food costs. That raised concerns among some economists that inflation could accelerate. But price changes since then have been mostly tame.
Consumer prices have tended to track the costs for producers. They rose 0.3 percent in June, mostly because of higher pump prices. Consumer prices rose 2.1 percent in June compared with the year prior.
The Fed targets inflation at about 2 percent as a guard against deflation, which could drag down wages and spark another recession. At the same time, the Fed wants to avoid excessive inflation and protect consumers and the purchasing power of the dollar.
Employers have stepped up hiring this year and consumers are more confident in the economy. But wage growth and spending have been sluggish. The unemployment rate, now at 6.2 percent, remains elevated compared with levels typical in a healthy economy.
 
Those trends have made it difficult for businesses to raise prices, because that could chase away customers. Many retailers have reported disappointing sales and profits this year.
Still, low inflation has enabled the Fed to pursue extraordinary measures to boost the economy. It has begun to unwind some of those measures, cutting a monthly bond-buying program to $25 billion, from $85 billion last year.
Those bond purchases had ensured low interest rates that encouraged investors to pour money into the economy.
 
Meanwhile, US factory output rose for the sixth consecutive month in July, led by a jump in the production of motor vehicles, furniture, textiles and metals.
Manufacturing production rose 1 percent in July compared with the prior month, the Federal Reserve reported Friday. Factory output in June was revised slightly higher to a 0.3 percent increase. Over the past 12 months, manufacturing has risen 4.9 percent.
Demand for autos surged 10.1 percent last month, the largest increase since July 2009. The broader increase in manufacturing points to stronger growth across the economy, suggesting that manufacturers expect the pace of business investment and consumer spending to improve in the coming months.
 
“Manufacturing will continue to add to the recovery throughout 2014 and into 2015,” said Stuart Hoffman, chief economist at PNC Financial Services.
Overall industrial production, which includes manufacturing, mining and utilities, rose 0.4 percent in July, dragged down by a 3.4 percent drop in production at utilities. Several other reports suggest that factory production improved this summer.
Manufacturers added 28,000 workers last month, according to the government’s jobs report. That builds on the 23,000 employees that factories added in June, a sign that companies expect demand to continue its upward swing.
Separately, the Institute for Supply Management, a trade group of purchasing managers, reported that its manufacturing index climbed to 57.1 in July. 
That’s the highest level since April 2011 and up from 55.3 in June.
Anything above 50 signals that manufacturing activity is growing.
 
The increase in the index led Paul Dales, senior US economist at Capital Economics, to conclude that “manufacturing payrolls may soon start to rise by close to 50,000 a month.”
Factory orders rose a seasonally adjusted 1.1 percent in June compared with the previous month, the Commerce Department reported Tuesday. Orders had fallen 0.6 percent in May after three straight monthly gains.
An 8.4 percent jump in demand for commercial aircraft drove much of the gain, yet orders also picked up for machinery, iron, steel, computers and electronics.
Rising factory output should help the current economic expansion to continue.
The US economy shrank at a 2.1 percent annual rate in the first quarter, although it bounced back at an annual clip of 4 percent in the second quarter
Most analysts expect the economy to expand at a roughly 3 percent rate in the second half the year.

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