September 28, 2022

PPI July 2022: Wholesale inflation falls 0.5%

PPI July 2022: Wholesale inflation falls 0.5%

Wholesale prices fell in July for the first time in two years as lower energy prices slowed the pace of inflation, the Bureau of Labor Statistics reported Thursday.

The Producer Price Index, which measures received prices for final demand products, fell 0.5% from June, the first monthly decline since April 2020, the following month. COVID-19 It has been declared a pandemic. Economists polled by Dow Jones had expected a 0.2% increase.

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

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

Excluding food, energy and commercial services, the producer price index rose 0.2% in July, less than the expected 0.4% gain. Core PPI rose 5.8% from a year ago.

The numbers come a day after the Consumer Price Index showed inflation was flat in July despite rising 8.5% from a year ago. The decline in the CPI also reflects the decline in energy prices which saw prices at the pump drop below $4 a gallon after hitting record nominal levels above $5 earlier in the summer.

“Producer-paid refrigeration prices portend a further lull in consumer prices, as producer prices rise more in inflation pipelines,” said Jeffrey Roach, chief economist at LBL Financial. “We expect producer prices to fall as supply chains improve. It could take up to three months for improved supply chains to affect prices for the end consumer.”

Federal Reserve officials are watching inflation data closely for clues about the state of the economy after more than a year of wrestling with high inflation.

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

This week’s data may give the Federal Reserve a reason to roll back interest rate increases that came in consecutive 0.75 percentage point increases in June and July. Markets are now pricing in a 0.5 percentage point movement in September.

The Fed no longer needs to apply monetary policy to the emergency brake, and that’s a good thing.

A separate Labor Department report on Thursday showed that weekly jobless claims totaled 262,000 for the week ending August 6, an increase of 14,000 from the previous week though a 2,000 lower estimate.

Claims have risen in recent weeks in a sign that the historically tight labor market is turning. Continuing claims rose 8000 to 1.43 million.