Wholesale inflation pressures were surprisingly subdued in July, with producer prices for final demand remaining unchanged after advancing 0.3 percent in June and 0.5 percent in May, as a 0.1 percent rise in the index for final demand goods offset a 0.1 percent decline in prices for final demand services. Producer prices less food & energy moved up just 0.1 percent, also below most expectations, though prices excluding food, energy and trade services did show some pressure by rising 0.3 percent, the same as in June and at the top of the range of analysts' expectations.
The flat monthly reading for overall producer prices pulled down the year-on-year rate by 0.1 percentage points from the prior month to 3.3 percent, while the year-on-year rate for prices excluding food and energy also fell back by 0.1 percentage points to 2.7 percent. Only prices excluding food, energy and trade services registered an increase in the year-on-year gain, which rose to 2.8 percent, up 0.1 percentage points from the level in June.
Factors pulling down the overall inflation reading featured a 0.5 percent drop in energy prices after a 0.8 percent rise in June. Electric power prices fell 1.6 percent on the month, gasoline was down 0.1 percent, natural gas prices fell 0.5 percent, and the price of heating oil fell 3.9 percent.
Pulling down the overall index and the services component were prices in trade services, reflecting margins received by wholesalers and retailers, which fell by a sharp 0.8 percent in July following increases of 0.7 percent in June and 0.9 percent in May.
The drop in services prices was the first monthly decline since December, and among products was led by retail margins for fuels and lubricants, which fell 12.7 percent. In contrast, prices for guestroom rental rose 3.9 percent.
The 0.1 percent increase in prices for final demand goods was the same as in June, and led by a 0.7 rise in prices of pharmaceutical preparations. Also moving higher were prices for eggs, fresh fruits, motor vehicles and liquefied petroleum. Conversely, prices for energy, meats, and nonferrous scrap decreased.
Foods prices as a whole continued to decline though at a much slower pace, with final demand prices falling 0.1 percent after a 1.1 percent drop in June.
Lastly, personal consumption prices, which some analysts regard as a preview of the CPI (reported tomorrow morning and expected to show a 0.2 percent monthly gain), were down 0.1 percent in July after rising 0.3 percent in June and 0.5 percent in May.
Forecasters see steady, moderate pressure for the July producer price report which in June and May showed sharp increases at trade services (wholesalers and retailers) as well as tariff-related hikes for steel and aluminum. A 0.3 percent monthly increase is expected for the July producer price headline which would match June's rise. When excluding food and energy, prices are also expected to rise 0.3 percent while excluding food, energy and trade services, a 0.2 percent gain is expected.
The Producer Price Index (PPI) of the Bureau of Labor Statistics (BLS) is a family of indexes that measures the average change over time in the prices received by domestic producers of goods and services. PPIs measure price change from the perspective of the seller. Effective with the January 2014 PPI data release in February 2014, BLS transitioned from the Stage of Processing (SOP) to the Final Demand-Intermediate Demand (FD-ID) aggregation system. The headline PPI (for Final Demand) measures price changes for goods, services, and construction sold to final demand: personal consumption, capital investment, government purchases, and exports.
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