Wholesale prices for goods and services in the US were unchanged in July, giving us another positive sign that inflation pressures may be easing. The Producer Price Index (PPI), which measures prices received by producers, was flat in July, the US Bureau of Labor Statistics (BLS) reported on Thursday.
The PPI fell 0.1% in June after rising 0.5% in May. On an annual basis, the index rose 4.7% in July. The July reading was weaker than the 0.2% rise expected by economists surveyed by Dow Jones. The June decline was also revised to 0.1% from the previously reported 0.3% fall.
Services prices rise while goods prices fall
Prices for final demand services rose 0.2% in July after increasing 0.5% in June. Prices for final demand goods, however, fell 0.7%, however, prices for final demand construction rose 2.2%.
The increase in services prices was mainly driven by prices for services excluding trade, transportation and warehousing, which rose 0.6%. Transportation and warehousing prices fell 1.8%, while trade services prices declined 0.1%.
Portfolio management prices jumped 6.5% in July, leading the increase in final demand services. Margins for health, beauty and optical goods retailers, automobile and auto parts retailers, lawn and garden equipment retailers, food and alcohol retailers and food and alcohol wholesalers also increased.
Prices for truck transportation of freight fell 1.8%. Prices for machinery and vehicle wholesaling, as well as securities brokerage, dealing and investment advice, also declined.
Energy prices lead decline in goods
The 0.7% fall in final demand goods prices was mainly driven by lower energy prices. Energy prices fell 3.1% in July, while food prices declined 0.9%.
Gasoline prices fell 5.7%, accounting for more than half of the overall decline in goods prices. Prices for fresh and dry vegetables, diesel fuel, jet fuel, residual fuels and thermoplastic resins and materials also fell.
At the same time, prices for motor vehicles and equipment rose 0.3%. Prices for electric power and grains also increased.
Core PPI rises
Excluding food and energy, the core PPI rose 0.2% in July, below the 0.3% increase expected by economists. Core PPI excluding trade services rose 0.4%.
For the 12 months ended in July, the index for final demand excluding food, energy and trade services rose 4.7%. The core PPI increased 4.2% on an annual basis.
The report follows the release of the consumer price index (CPI) on Wednesday. The CPI rose 0.1% in July as lower energy prices helped ease price pressures.
Annual consumer inflation was 3.4%, still above the Federal Reserve’s 2% target. Core CPI, which excludes food and energy, rose 0.2% in July and was up 2.5% from a year earlier.
Markets see lower chances of rate hike
The latest PPI data added to expectations that inflation may be losing some momentum after rising earlier this year amid the Iran war and President Donald Trump’s tariffs.
“Net, net, pipeline pressures at the lower stages of production are not adding to the inflation risks the consumer faces,” said Chris Rupkey, chief economist at Fwdbonds told CNBC. “It counts as good news that for a second consecutive month, PPI final demand prices have not gone up adding to the cost of living crisis faced by Americans.”
Fed officials have been watching several inflation measures as they assess the path of interest rates. Some officials have been pushing for higher interest rates to bring inflation back to the central bank’s 2% target.
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