The US producer price index (PPI) climbed 0.2% in June, exceeding expectations, driven by a rise in the cost of services. However, the overall trend suggests inflation pressures are easing.
The PPI, which measures prices paid by producers, increased 2.6% year-on-year, marking a larger gain compared to May’s 2.4% increase. The rise was largely attributed to a 0.6% increase in services prices, led by a 1.9% surge in trade services margins. However, wholesale goods prices dropped 0.5% in June, primarily due to falling energy prices.
The core PPI, which excludes food, energy, and trade services, remained unchanged in June, suggesting a continued easing of inflation pressures.
The report strengthens expectations that the Fed could begin cutting interest rates as early as September. However, the central bank remains cautious about labor market weakness.
The report, coupled with the recent consumer price index (CPI) decline, suggests that personal consumption expenditures (PCE) inflation likely rose marginally in June. Overall, the producer price report indicates that inflation is still a concern, but the trend is moving in the right direction.