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Manufacturers concerned about rising raw materials costs

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A Manufacturers’ Outlook Survey conducted by the National Association of Manufacturers revealed that accelerating raw materials costs are the No. 2 business concern after workforce recruitment and retention.

Prices of raw materials are expected to rise over the next 12 months at their fastest pace in seven years.

Producer prices for final demand goods and services rose 0.3 percent in June, largely on higher energy costs, according to NAM.

Moreover, producer prices have increased 3.3 percent since June 2017, up from 3.1 percent year-over-year in the prior release and the fastest pace since December 2011. This measure has drifted higher since June 2017, when it was 1.9 percent.

At the same time, core producer prices — which exclude food, energy and trade services — increased 2.7 percent over the past 12 months, up slightly from the 2.6 percent year-over-year rate in May.

Similarly, consumer prices edged up 0.1 percent in June, slowing a bit from the 0.2 percent gains in April and May.

Excluding food and energy, core consumer inflation rose 0.2 percent in June for the second straight month.

The bottom line is that the consumer price index has risen 2.8 percent over the past 12 months, up from 2.7 percent in the prior release. It was the highest year-over-year rate since February 2012 and continued an upward trend since the 1.6 percent pace in June 2017.

At the same time, core consumer prices, which exclude food and energy costs, have risen 2.3 percent over the past 12 months, essentially matching the pace in May, which was a 15-month high. With these data points, the Federal Reserve will likely keep a close eye on inflation, especially given strength in the overall economy, including the labor market.

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