US wholesale inflation flat

U.S. wholesale prices were flat in July due to falling energy costs, the government said Wednesday in a report that pointed to very little inflationary pressure in the economy. The Labor Department said its producer price index (PPI), which measures price changes before they reach the consumer, showed no change last month compared with June, when it had surged 0.8 percent, the most in nine months, on a jump in gasoline prices. A drop in natural-gas and gasoline costs held back the index in July. Energy costs fell 0.2 percent after soaring 2.9 percent in June. Gasoline prices fell 0.8 percent, and natural-gas costs tumbled 3.9 percent. Excluding volatile energy and food costs, core PPI rose only 0.2 percent. Core wholesale prices are up only 1.2 percent over the past 12 months, the smallest year-over-year increase since late 2010. Weak inflation has helped consumers increase spending this year despite slow income growth and higher pension taxes. But extremely low inflation is dangerous because it raises the risk that a major shock to the economy could send prices and wages into a downward spiral known as deflation. Weak inflation also encourages businesses and consumers to delay purchases.