In what looked like another constructive development on the inflation front in the US, producer prices rose less than expected in June.
A day on from what was widely hailed as the first real evidence of consumer price disinflation of the current cycle, the BLS said wholesale prices rose just 0.1% last month from May. That matched the lowest estimate from more than four-dozen economists.
The cooler-than-anticipated print came on the heels of a 0.4% drop the prior month. On a YoY basis, the headline PPI gauge likewise rose just 0.1%.
It was the smallest increase in almost three years and suggested additional disinflation on the consumer side may be in the pipeline.
Excluding food, energy and trade, producer prices barely rose in June from May, and increased 2.6% from the same month a year ago. That too was a new cycle low.
Some measures of prices on the services side moved up, including those for food and alcohol retailing, traveler accommodation, insurance, hospital inpatient care, airline passenger services and, notably, deposit services.
On the goods side, an increase in energy prices was offset by declines elsewhere, including a third straight drop for the foods index (the sixth in seven, by the way). A gauge of core final demand goods notched its first monthly decline since May of 2020.
Bottom line: The PPI data was incremental to the disinflation narrative, but it was overshadowed by CPI, so the market impact was likely to be limited.
Meanwhile, jobless claims once again undershot estimates at 237,000 for the week to July 8. Consensus expected 250,000.
The weekly figures are now chopping around after falling from the elevated levels which persisted for three weeks in June.
Actual, unadjusted claims rose by 7,000, and at 1.729 million, continuing claims were slightly higher than anticipated.
Together, Thursday’s releases didn’t necessarily move any needles, but if you’re the optimistic type, I suppose you could suggest that in the current macro environment, characterized as it is by pervasive hand-wringing over the prospect of stagflation, the combination of receding wholesale prices and a resilient labor market is amenable to constructive spin.
I guess the Fed has used the appropriate formula and timing to arrest and control inflation while also avoiding a recession.
One can only note the obvious – they apparently knew what they were doing. And being able see them tested under Powell’s leadership, and able to express confidence in their judgements is a confidence-building outcome. Jobless claims and PPI are less a source of worry and less a sign of economic weakening. Earlier on, I lacked confidence in Powell. Now, in fairness, I feel a need to say, “Yay, Jerry!”
Walt…Thanks for the new email format and a set of articles in each. Really liking it.