The data released on Thursday, August 13, showed that wholesale prices in the United States remained unchanged in July compared to the previous month, with inflation cooling more than economists had expected. This further reduces the likelihood of a Federal Reserve rate hike in September.
According to seasonally adjusted data released by the Bureau of Labor Statistics (BLS) of the U.S. Department of Labor on Thursday, the Producer Price Index (PPI) for measuring wholesale prices remained flat in July compared to the previous month. This was below the 0.2% increase predicted by economists surveyed by Dow Jones & Company. The June PPI data was revised in this report, changing from a previously reported 0.3% decrease to a 0.1% decline.
Excluding the more volatile food and energy prices, the core PPI increased by 0.2% from the previous month, falling short of the expected 0.3% rise. The core PPI, with trade services excluded, rose by 0.4%.
Calculating the data without seasonal adjustments, the overall PPI in July rose by 4.7% year-on-year, while the core PPI excluding food and energy increased by 4.2% year-on-year. In comparison, the overall PPI growth rate for June was 5.5%.
Service prices rose by 0.2% in July, with investment management service prices seeing a significant surge of 6.5%, becoming a major factor driving the overall increase in service prices.
Commodity prices decreased by 0.7%, mainly due to a 3.1% drop in energy prices, with gasoline prices seeing an even larger decline of 5.7%. Food prices also decreased by 0.9%.
The latest data released on Thursday once again indicated a positive sign that inflation is cooling at a pace faster than economists had expected.
Federal Reserve officials have been weighing various factors affecting prices, with several key officials advocating for a rate hike to push inflation back to the central bank’s target level of 2%.
The Labor Statistics Bureau reported on Wednesday that the Consumer Price Index (CPI) only rose by 0.1% compared to the previous month in July, with the core CPI excluding food and energy prices increasing by 0.2%. These data points have dampened market expectations for a rate hike by the Federal Reserve in September, and the PPI data released on Thursday further diminished those expectations.
PPI serves as a potential indicator of future retail price inflation rates in the coming months. It measures the costs paid by producers of goods and services for their products, rather than the costs borne by consumers, but it forecasts potential changes in store prices, making it a good leading indicator of inflation pressure. The core PPI is considered a better predictive indicator.
Chris Rupkey, Chief Economist at financial market research firm FWDBONDS, stated, “For the second consecutive month, final demand PPI has not risen, exacerbating the cost-of-living crisis facing Americans, which is good news.”
(This article was adapted from a CNBC report)