US factory gate prices rose sharply in July

Prices for core US manufactured goods in July rose at the fastest rate since January, new data shows.

The US government’s index of farm and factory gate prices excluding food and energy rose by 0.4 per cent, the Labor Department said. The increase was double the expected 0.2 per cent rise.

The core producer price index has gained 2.5 per cent in the 12 months to July – the biggest increase since June 2009. It gained 0.3 per cent in June.

The signs of resurging price pressures in the US may serve to stave off talk of a further round of fiscal stimulus for the economy, which would add to inflationary pressures.

Including food and fuel, overall producer prices rose a less steep 0.2 per cent, but this was again double the expected 0.1 per cent increase.

The overall index was boosted by the high cost of food as prices rose at 0.6 per cent in July. Potato prices went up the most in almost a year during the month.

But fuel prices came down in the month as global demand faltered, lowering oil prices, leaving petrol prices down 2.8 per cent.

The Federal Reserve last week promised to keep interest rates near zero for the next two years to stimulate growth, saying the outlook for inflation over the medium-term was subdued.