US wholesale inflation slowed as expected in July, easing after an unexpected flare-up the month before. The Producer Price Index (PPI), a key indicator of average price changes for producers and manufacturers, showed a 2.2% increase for the 12 months ending in July, down from the 2.7% rise in June. This data, released on Tuesday, indicates a moderation in price hikes.
Monthly figures revealed a 0.1% increase in prices, a slower pace compared to the 0.2% uptick in June. Economists had anticipated a 0.2% monthly increase and a 2.3% annual slowdown.
PPI is often seen as a precursor to retail-level inflation trends. The upcoming release of the Consumer Price Index (CPI) for July on Wednesday will provide further insights into consumer price changes.
The marginal monthly rise in overall PPI was driven by a 0.6% surge in goods prices, while services prices fell by 0.2%. The decline in services prices was mainly due to a correction in trade services, which dropped 1.3% after a significant 1.4% increase in June.
Excluding volatile energy and food prices, core PPI remained unchanged for the month, leading to an annual gain of 2.4%, the lowest since March.
While PPI is crucial for understanding inflation trends upstream of consumer levels, it usually takes a back seat to CPI, which is set to be released a day after PPI this month.
Market analysts are closely watching the CPI data, expecting a gradual decline in inflation rates. Forecasts suggest a 0.2% monthly increase in CPI, driven by higher gas prices, with an annual rate holding steady at 3%. Core CPI is also projected to rise by 0.2% monthly but slow down annually to 3.2%.
This week's inflation data, particularly the CPI report on Wednesday, will be under intense scrutiny following a recent weak jobs report that rattled the markets last week.
