U.S. producer prices increased slightly more than expected in July as the cost of services rebounded at the fastest pace in nearly a year, but the trend remained consistent with a moderation in inflationary pressures.
The producer price index for final demand rose 0.3 per cent last month, the Labor Department said on Friday. Data for June was revised lower to show the PPI unchanged instead of nudging up by the previously reported 0.1 per cent.
In the 12 months through July, the PPI increased 0.8 per cent after gaining 0.2 per cent in June, boosted by a lower base of comparison last year. Economists polled by Reuters had forecast the PPI would climb 0.2 per cent on the month and advance 0.7 per cent on a year-on-year basis.
The government reported on Thursday that consumer prices rose moderately in July, strengthening expectations that the Federal Reserve would likely keep interest rates unchanged next month. Since March 2022, the U.S. central bank has raised its benchmark overnight interest rate by 525 basis points to the current 5.25 per cent – 5.50 per cent range.
The cost of wholesale services jumped 0.5 per cent last month, the largest increase since last August, after dipping 0.1 per cent in June.
A 7.6 per cent surge in portfolio management fees accounted for 40 per cent of the rise in services. There were also increases in the costs of machinery and vehicle wholesaling, outpatient care, chemicals and allied products wholesaling as well as securities brokerage, dealing investment advice and related services.
Airline fares also increased, but margins for food and alcohol retailing fell 2.5 per cent. The cost of freight and cargo transportation also declined.
Goods prices ticked up 0.1 per cent last month after being unchanged in June. A 0.5 per cent rebound in the cost of food was largely offset by energy prices, which were unchanged.
Excluding the volatile food and energy components, the so-called core goods prices were unchanged last month after falling 0.2 per cent in June.
The narrower measure of PPI, which strips out food, energy and trade services components, rose 0.2 per cent after inching up 0.1 per cent in June. In the 12 months through July, the so-called core PPI increased 2.7 per cent, matching June’s rise.
Reuters – Lucia Mutikani