U.S. inflation pressures showed further signs of easing in July, with producer prices rising just 0.1%, less than expected.
According to the Bureau of Labor Statistics, the Producer Price Index (PPI) for final demand, which tracks the average change in selling prices received by domestic producers of goods and services for the products they sell to households, governments and foreign buyers, increased only slightly.
Economists had been expecting a 0.2% increase. Over the past year, the PPI has risen 2.2%, reflecting a continuing easing in inflation. A month ago, prices had risen 0.2% and were up 2.6% over the 12-month period.
Core PPI, which excludes volatile items such as food and energy, remained unchanged in July, the most moderate reading in four months. Compared to the same period last year, the core index was up 2.4%.
Energy prices rose 1.9% in July, the biggest increase since February after falling for the past two months. Food prices rose 0.6%, also the biggest increase since February.
Commodity prices rose 0.6 percent. A quarter of the increase was due to a 2.8 percent increase in gasoline prices. Commodity prices excluding food and energy rose 0.2 percent.
Prices for services fell 0.2%, the biggest drop since March 2023. The drop was driven by a 1.3% drop in so-called traded services, a measure of retail and wholesale margins – the difference between what retailers pay for goods and the selling price.
Prices in the transportation and warehousing industry rose 0.4 percent after three consecutive months of declines, the biggest increase since February.
Services prices excluding trade services and transport and warehousing rose 0.3 percent.
The PPI also tracks “intermediate demand” prices — the prices businesses pay for goods and services that are then processed for sale to households, governments or overseas buyers. Prices of processed goods for intermediate demand rose 0.7%, raw goods rose 3.6% and the price of services rose 0.3%.
These benign producer price readings come ahead of the more closely watched Consumer Price Index (CPI) due for release on Wednesday. With inflation showing signs of easing and weaker-than-expected July job market data, the consensus on Wall Street is that the Fed will begin cutting interest rates starting next month.
Stock futures rose following the release of a weaker-than-expected producer price index, a report that is seen as increasing pressure on the Fed to cut interest rates.
