The prices of everything from vegetables to car insurance rose in June, the sixth consecutive month that wholesale prices increased, and Federal Reserve Chairman Ben Bernanke warned Tuesday that consumers can expect to be pounded for a while longer.
“With gasoline and other consumer energy prices rising in recent weeks, inflation seems likely to move temporarily higher in the near term,” Bernanke told the Senate Banking Committee.
The price producers paid for goods — often passed on to consumers — jumped 1.8 percent in June, the biggest rise since November, the Labor Department reported Tuesday.
The increase from a year ago was 9.2 percent, the biggest jump since 1981.
The numbers, and Bernanke’s assessment that the economy is still “skewed to the downside,” came the same day General Motors announced it will lay off salaried workers, borrow money and reduce production in an effort to cut $15 billion and cope with the sluggish auto market. The reports also come days after federal officials devised a plan to help bolster local mortgage giants Fannie Mae and Freddie Mac.
Mortgage lenders have been hit hard by loan defaults and the tightening of the credit markets in the wake of a national housing crisis, and auto manufacturers have been some of the earliest hitby the economic slowdown as wary consumers opt out of buying big-ticket items.
Auto sales fell 3.3 percent last month, the Commerce Department reported Tuesday, highlighting the auto industry’s troubles with a weak economy and soaring gasoline prices.
“We’ll see this spread to the retail service areas as people have less money to spend because everything is costing a little more,” said Stephen Fuller, director of the Center for Regional Analysis at George Mason University.
“So when people decide, well, we can go to the movies or go out to dinner, they’ll say, we can do one or the other, but we can’t do both,” Fuller said. “Slowly there’s a little erosion around the edges in discretionary spending.”
The uptick in wholesale prices has been fueled largely by the escalating cost of food and gasoline.
Nationally, wholesale prices for food rose 1.5 percent from May to June, with vegetable prices jumping 14.7 percent.
Locally, food at grocery stores and restaurants cost consumers between 4 and 5 percent more in May than a year ago, according to the most recent Labor Department statistics.
Transportation costs, including the prices of car insurance and car repairs, rose 9 percent over the past year in the Baltimore-Washington area, with gas prices climbing 23 percent.
President Bush on Tuesday conceded: “It’s been a difficult time for many American families” and urged citizens to conserve energy.
Economists said slower economic growth could continue through next year but inflation might abate sooner than that.
Peter Morici, an economist at the University of Maryland, said energy prices will top out before food prices do, but because gas prices lag oil prices, they will continue to rise this year.
“My feeling is that we’re going to be heading for difficult economic time through the end of 2009,” Morici said. “We’re going to continue to have problems for a while.”
