Producer Price Inflation Misses Expectations

Producer price inflation was flat in July, coming in below expectations as the measure of final demand services contracted for the first time since December.

The flat reading for last month compares with an advance of 0.3% in June and the consensus on Econoday for another rise of 0.3%. Year-on-year, PPI rose 3.3%, slightly slower than the 3.4% pace of the month earlier. Stripping out foods, energy and trade services, PPI rose 0.3% in July, the same pace as the month earlier and slightly ahead of the prediction on Econoday for 0.2%.

The reading for goods was up 0.1% in July, unchanged from June, while final demand energy contracted 0.5% and food was down 0.1%.

“Prices for eggs for fresh use, fresh fruits and melons, motor vehicles, and liquefied petroleum gas also moved higher,” the Bureau of Labor Statistics said. “Conversely, the electric power index fell 1.6%. Prices for meats; hay, hayseeds, and oilseeds; and nonferrous scrap also decreased.”

For services final demand, the index decreased 0.1% after trade services, which measures changes in margins for wholesalers and retailers, fell by 0.8%.

“The export-related price measures nearly all fell, as might be expected with the ‘trade war’ and a rising dollar,” said Michael Englund, chief economist with Action Economics. “The figures are adhering to the pull-back we expect in headline year-on-year inflation measures into late-Q3 and Q4, with added help from the July headline undershoot.”