Producer Inflation Data Were Weak
Wholesale inflation came in cooler than expected in July
The Bureau of Labor Statistics (BLS) reported that the Producer Price Index (PPI) for final demand increased by 0.4% in July, seasonally adjusted, following a revised 1.1% increase in June. The PPI measures the change in the prices of goods and services sold by producers to wholesalers or retailers. The July increase was below the market consensus of a 0.5% rise.
Transportation and warehousing services were particularly weak in this category, falling by 1.7% on a monthly basis
The PPI for goods increased by 0.5% in July, after advancing 1.2% in June. The PPI for final demand less food and energy, a measure of core producer inflation, rose 0.3% in July, after increasing 0.7% in June. The market consensus was for a 0.4% rise in the PPI for final demand less food and energy.
The PPI has been more volatile than consumer inflation over the past year. The monthly change in the index has ranged from -0.2% to 1.1%. The annual change in the index has ranged from 2.6% to 11.3%.
The Federal Reserve has been closely watching inflation data as it considers whether to continue raising interest rates. The Fed has raised interest rates four times this year in an effort to bring inflation down to its target of 2%.
The July PPI data suggests that inflation is cooling, which could give the Fed some room to pause its rate hike campaign. However, the Fed is likely to remain cautious until it sees more evidence that inflation is under control.
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