WASHINGTON: US producer prices unexpectedly fell in June as rising costs for energy goods were offset by weakness in services, pointing to subdued inflation that should allow the Federal Reserve to keep pumping money into the economy to arrest a downward spiral.

Still, deflation remains unlikely as the economy battles depressed demand caused by the COVID-19 pandemic. The report from the Labor Department on Friday also showed underlying producer inflation ticked up last month.

Deflation, a decline in the general price level, is harmful during a recession as consumers and businesses may delay purchases in anticipation of lower prices. The economy slipped into recession in February. The Fed is injecting money into the economy through extraordinary measures while the government has provided nearly $3 trillion in fiscal stimulus.

The producer price index for final demand dropped 0.2% last month after rebounding 0.4% in May. In the 12 months through June, the PPI declined 0.8%, matching May's decrease.

Economists polled by Reuters had forecast the PPI would climb 0.4% in June and fall 0.2% on a year-on-year basis. Excluding the volatile food, energy and trade services components, producer prices rose 0.3% in June. That was the biggest gain in the so-called core PPI since January and followed a 0.1% rise in May.

In the 12 months through June, the core PPI edged down 0.1%. The core PPI dropped 0.4% on a year-on-year basis in May, which was the largest annual decrease since the introduction of the series in August 2013.

In June, wholesale food prices decreased 5.2% after surging 6.0% in May. Wholesale energy prices shot up 7.7% in June after rebounding 4.5% in the prior month.

Gasoline prices rose 26.3% after accelerating 43.9% in May. Goods prices gained 0.2% last month after jumping 1.6% in May. Excluding food and energy, goods prices inched up 0.1% last month after being unchanged in May.