Producer prices in the U.S. increased by a modest 0.1% in July, according to the latest data from the Bureau of Labor Statistics, signaling a continued slowdown in inflationary pressures at the wholesale level.
- This marks a slight deceleration from June’s 0.2% rise and represents the third-best month for producer price stability this year.
- The annual Producer Price Index (PPI) also reflected this cooling trend, with a year-over-year increase of 2.2% in July, down from 2.6% in June. This is the lowest level for the annual index since April when prices began to rise.
Core producer prices, which exclude the often-volatile food and energy sectors, were flat in July, a significant drop from the 0.4% increase recorded in June. This marks the best month for core prices since March, when they actually fell. The annual core PPI slowed dramatically to 2.4% in July from 3.0% in June, reaching its lowest point since March.
Beat The Street: These figures were better than economists had anticipated. Analysts had projected a 0.2% rise in overall producer prices, with the annual index expected to slow to 2.3%. Core prices were also expected to increase by 0.2%, with the annual core index slowing to 2.7%.
Goods: Unlike what is happening at the consumer level, goods prices, particularly energy, were the primary drivers of the price increases in July. The prices for final demand goods rose by 0.6%, the largest advance since a 1.1% jump in February.
- Energy Problems: Nearly 60% of the broad-based increase in goods prices can be attributed to a 1.9% rise in the final demand energy index.
Services: Prices for final demand services fell by 0.2% in July, the largest decrease since March 2023, when they also declined by 0.2%. This drop in service prices helped offset some of the inflationary pressures from goods, contributing to the overall moderation in producer prices.
For consumers, this report is a positive development, suggesting that inflation, at least on the wholesale level, is cooling faster than anticipated. However, the continued rise in goods prices, particularly energy, indicates that there are still areas of the economy where inflationary pressures remain strong.
