U.S. producer prices edge up in June

The Labor Department said on Friday its seasonally adjusted producer price index rose 0.1 percent last month. Analysts polled by Reuters expected the index to drop 0.5 percent.

The increase was driven by gains in consumer goods like household appliances, light trucks and pet food.

The modest 0.1 percent increase in U.S. producer prices in June is another illustration that the Fed doesn't need to worry about inflation, at least not in the near-term, said Paul Ashworth, chief U.S. economist at Capital Economics in Toronto.

While wholesale prices of finished goods rose, costs for intermediate and crude goods fell, suggesting less inflation pressure down the road.

The data did not appear to affect prices on U.S. stock index futures, which rose. Yields on U.S. government debt hovered near record lows, with appetite for safe-haven assets underpinned by a downgrade to Italy's sovereign rating.

Hiring by U.S. companies slowed dramatically in the second quarter as employers grew worried about a sagging global economy hurt by Europe's snowballing debt crisis.

China's growth rate slowed for a sixth successive quarter to its slackest pace in more than three years.

So-called core inflation, which strips out more volatile food and energy prices, rose 0.2 percent, in line with expectations.

While overall inflation has cooled recently, core inflation has held at higher levels.

Some policymakers at the Fed worry that further moves to lower borrowing costs could fuel higher inflation, though the central bank has said it was ready to do more to help the economy if needed.

Energy prices dropped 0.9 percent in June, dragged down by a record drop in prices for residential electric power, which fell 2.1 percent. Diesel fuel prices sank 8.8 percent.

The fall in energy prices is likely to help the economy as lower costs for fuels and other input prices leave companies more money to spend on other things, such as equipment or even hiring.

Many employers are concerned over plans by the U.S. government to cut spending and let tax cuts expire next year, a jolt that could send the economy into recession.

Later on Friday, the Thomson Reuters/University of Michigan consumer sentiment survey is expected to show Americans remained wary in early July of a sour jobs market and news that the global economy is cooling. The headline index for sentiment dropped to a six-month low in June.