HomeLatest NewsProducer Price Index July 2022: Wholesale inflation down 0.5%

Producer Price Index July 2022: Wholesale inflation down 0.5%

Wholesale prices fell in July for the first time in two years, the Bureau of Labor Statistics said on Thursday, as plunging fuel prices slowed inflation.

The producer price index, which measures prices received for final demand goods, fell 0.5% from June, the first month-on-month decline since April 2020, the month following the announcement of the Covid-19 pandemic. Economists polled by Dow Jones had expected a 0.2% rise.

On an annualized basis, the index rose 9.8%, the lowest rate since October 2021. This compares with an 11.3% increase in June and a record 11.7% increase in March.

Most of the decline came from energy, which fell 9% at the wholesale level, and accounted for 80% of the total decline in commodity prices, which fell 1.8%. The index for services rose 0.1%.

Excluding food, energy and trade services, PPI rose 0.2% in July, less than an expected 0.4% gain. Core PPI rose 5.8% from a year ago.

The consumer price index showed inflation was flat in July although the numbers came a day after it was 8.5% higher than a year ago. The easing in CPI also reflected a slide in energy prices that dropped below $4 a gallon at the pump after hitting record nominal levels above $5 earlier in the summer.

“Cooling prices offered by producers signal a further cooling for consumer prices, as producer prices add to the inflation pipeline,” said Jeffrey Roach, chief economist at LPL Financial. “As supply chains improve, we expect producer prices to come down. It may take up to three months for improved supply chains to affect prices for end consumers.”

Federal Reserve officials are closely watching inflation data for clues about where the economy stands after more than a year of battling high inflation.

Before July’s easing, prices were running at their highest levels in more than 40 years. Supply chain issues, demand imbalances, and high levels of fiscal and monetary stimulus linked to the pandemic pushed the annual CPI rate to 9%, above the Fed’s 2% long-term target.

This week’s data could give the Fed reason to dial back its rate hikes of 0.75 percentage points consecutively in June and July. The market is now pricing in a 0.5 percentage point move in September.

A separate Labor Department report on Thursday showed weekly jobless claims totaled 262,000 for the week ended Aug. 6, up 14,000 from the previous week but 2,000 below estimates.

Claims have risen in recent weeks in a sign that a historically tight labor market is shifting. Continuous claims rose by 8,000 to 1.43 million.

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