Another day, another benign inflation readout for a Fed chair who’d very much like to avoid raising rates prior to interim elections in November.
Wholesale inflation in the US was flat last month, the BLS said Thursday, in a release that undershot consensus, at least on the headline.
The unchanged read for final demand prices in July came on the heels of a June decline that was shallower than initially reported. The MoM print for that month now shows a -0.1% drop.
On a YoY basis, the headline PPI index fell to 4.7%, also cooler than consensus.
Under the hood, the goods gauge posted a second consecutive outsized decline, falling 0.7% in July from June courtesy of another big drop (-3.1%) for the energy gauge. The food index fell 1.9%, the most pronounced decline since January.
On the services side, a large jump on the portfolio management index helped drive a modest 0.2% overall increase. The transportation and warehousing line fell a second month in the first back-to-back decline since early 2025.
The ex-food and energy readouts were 0.2% MoM and 4.2% YoY, respectively, versus consensus of 0.3% and 4.1%.
The figures came in the wake of an encouraging CPI report which saw traders trim September Fed hike odds to 35% or so.
Thursday’s PPI release will doubtlessly be viewed by the Committee’s doves as additional evidence in favor of postponing a hike Kevin Warsh probably never intended to deliver in the first place.
Was Kevin privy to this data before the meeting?
No. He’s just a sycophant.
Putting aside expectations, PPI does not look “cool” to me. Seems like MOM volatility, influenced by oil prices (in transportation, food, energy). PPI final demand unch MOM in July, -0.1% June, +0.5% May, and looking at the MOM over the past several months, the pattern is when energy is signif +ve, so is overall PPI. Meanwhile, PPI final demand is +4.7% YOY in July, which is high.
Release excerpts on the influence of energy prices:
“Prices for final demand services advanced 0.2 percent in July after rising 0.5 percent in June. The July increase can be traced to the index for final demand services less trade, transportation, and warehousing, which moved up 0.6 percent. Conversely, the indexes for final demand transportation and warehousing services and for final demand trade services decreased 1.8 percent [i.e. FUEL PRICES] and 0.1 percent, respectively.”
“Final demand goods: The index for final demand goods fell 0.7 percent in July after moving down
1.4 percent in June. A major factor in the July decrease was a 3.1-percent decline in prices for final
demand energy. The index for final demand foods moved down 0.9 percent. Conversely, prices for
final demand goods less foods and energy increased 0.1 percent.”
“Product detail: More than half of the July decrease in the index for final demand goods can be
attributed to a 5.7-percent decline in prices for gasoline. The indexes for fresh and dry vegetables,
diesel fuel, jet fuel, residual fuels, and thermoplastic resins and materials also fell. In contrast, prices
for motor vehicles and equipment moved up 0.3 percent. The indexes for electric power and for
grains also increased.”