U.S. July Wholesale Prices Stagnated as Service Costs Fell

(Bloomberg) -- U.S. wholesale prices were unchanged in July as costs for services fell for the first time this year, a Labor Department report showed Thursday in Washington.

Highlights of Producer Prices (July)

  • Producer-price index was unchanged m/m (est. 0.2% increase) after 0.3% gain the previous month
  • PPI rose 3.3% from a year earlier (est. 3.4%) after 3.4% gain in prior 12-month period
  • Excluding food and energy, core gauge increased 0.1% m/m (est. 0.2% increase) and was up 2.7% y/y (est. 2.8% gain)
  • PPI excluding food, energy, and trade services, a measure some economists prefer because it strips out the most volatile components, rose 2.8% y/y following 2.7% gain

Key Takeaways

The figures, which measure wholesale and other selling prices at businesses, indicate price pressures in the production pipeline were fairly contained at the start of the second half of 2018. While U.S. demand is rising, there’s concern about higher materials costs and persistent uncertainty as the Trump administration imposes tariffs and other nations including China retaliate.

The cost of goods rose 0.1 percent from June, bringing the annual increase to 4.5 percent -- the biggest gain since December 2011, the report showed. Services prices decreased 0.1 percent from the prior month, reflecting lower margins at wholesalers and retailers. Margins for fuels and lubricants retailing dropped 12.7 percent, while cost gauges for machinery and equipment parts wholesaling, hospital outpatient care, and airline passenger services also decreased.

While the consumer price index due Friday is considered a more important indicator of inflation, data on producer prices help provide insights into the direction of input costs that businesses are facing.

U.S. July Wholesale Prices Stagnated as Service Costs Fell

Other Details
  • Excluding the volatile categories of food, energy, and trade services, producer costs increased 0.3 from June, similar to the prior month
  • Energy prices decreased 0.5 percent from the prior month; food costs fell 0.1 percent following a 1.1 percent drop the prior month
  • Prices for final demand trade services, which measure margins received by wholesalers and retailers, fell 0.8 percent

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