Wholesale prices hit 27-year high on soaring energy costs

 

Japanese annual wholesale price inflation jumped to 7.1 per cent in July, a 27-year high and well above expectations, adding to fears that high energy and commodity costs are squeezing firms and pushing the economy into recession.

The soaring wholesale inflation comes as worries grow that Japan’s longest post-war recovery may have ended as exports – the main engine of growth in the world’s No2 economy – sputter in a global slowdown.

“In the short term, the rise will hurt corporate profits and cost-push inflation will weigh on the economy for a while as it enters a recession,” said Naoki Iizuka, an economist at Mizuho Securities.

Still, given a recent 20 per cent slide in oil prices and falls in many other raw material prices since early July, some economists said wholesale inflation could soon peak out. Financial markets took the data in their stride.

The jump in wholesale prices, as measured by the corporate goods price index (CGPI), in the year to July topped a market consensus forecast for a 5.8 per cent rise and was sharply higher than the 5.6 per cent annual figure in June data.

As in other developed countries, Japanese wholesale prices are rising at their fastest rate since 1981, when inflation accelerated in the wake of the second oil shock.

Final goods prices charged to customers by businesses -- an approximate match for consumer inflation – rose 1.6 per cent in July from a year earlier, showing the pressure companies face as their wholesale costs rise almost four times as fast.  (Reuters)

The number

7.1%: Japan’s annual wholesale inflation rate in July, which was well above expectations