July Producer Price Index Holds Steady, Signaling Easing Wholesale Inflation

The U.S. Bureau of Labor Statistics reported that the producer price index (PPI) for July was unchanged month-over-month, missing the Dow Jones consensus forecast for a 0.2 % rise. On an annual basis, the headline PPI rose 4.7 %, down from 5.5 % in June and below the 4.9 % expectation. Core PPI, which excludes food and energy, increased 0.2 % month-over-month and 4.2 % year-over-year, also missing the 0.3 % and 4.1 % forecasts respectively.

CNBC

Earlier in the year, inflation pressures intensified after the United States imposed tariffs and geopolitical tensions disrupted oil flows through the Strait of Hormuz, driving spikes in energy and commodity prices and contributing to a 5.5 % annual rise in the PPI in June. The latest data show a reversal, with energy prices pulling the overall index lower.

US PPI remains unchanged in July, signaling easing wholesale inflation

• Month-over-month change: PPI 0.0 % (flat) vs. expected +0.2 %

Producer Inflation Unchanged in July, Below Expectations (UPDATED)

• Annual headline PPI: 4.7 % (down from 5.5 % in June) vs. expected 4.9 %

Producer Inflation Unchanged in July, Below Expectations (UPDATED)

• Core PPI (ex-food & energy): 0.2 % month-over-month, 4.2 % annual (forecast 0.3 % and 4.1 %)

Producer Inflation Unchanged in July, Below Expectations (UPDATED)

• Energy component: Final-demand energy prices fell 3.1 %; gasoline dropped 5.7 %

Producer Inflation Unchanged in July, Below Expectations (UPDATED)

• Goods component: Final-demand goods prices declined 0.7 %

United Press International (UPI)

• Services component: Final-demand services rose 0.2 % (down from a 0.5 % rise in June)

Producer Inflation Unchanged in July, Below Expectations (UPDATED)

• Portfolio management: Prices surged 6.5 % in July, a typical quarterly reporting effect

CNBC

The flat headline reading and moderation in core inflation give the Federal Reserve additional leeway as it approaches its September policy meeting. Market participants have already reduced the probability of a 25-basis-point rate hike in September, with futures indicating a roughly 38 % chance of an increase versus a 62 % chance of no change. The easing of wholesale price pressures also buoyed equity markets and lowered Treasury yields, reinforcing expectations that the Fed may pause its tightening cycle.

Producer Inflation Unchanged in July, Below Expectations (UPDATED)

• Federal Reserve officials are using the data to argue for a more measured approach, citing the cooling trend as evidence that inflation may be self-moderating.

Boston Herald

U.S. equity futures moved higher after the release, and the 2-year Treasury yield slipped to 4.16 %. The dollar weakened and gold prices rose modestly. Analysts noted that the flat PPI and a modest 0.1 % rise in the consumer price index the previous day reinforce the view that inflationary momentum is weakening.

US July PPI Below Expectations as Producer Inflation Cools Significantly, Easing Fed Rate Hike Pressure

• “Net, net, pipeline pressures at the lower stages of production are not adding to the inflation risks the consumer faces,” — Chris Rupkey, chief economist at Fwdbonds

CNBC

• “The soft (producer prices) reading for July points to reduced inflationary pressure for businesses in coming months,” — Ben Ayers, senior economist at Nationwide

Boston Herald