US Wholesale Inflation Cools Further in July

US producer inflation showed further signs of easing in July, adding to expectations that the Federal Reserve may have more flexibility to keep interest rates unchanged. The Producer Price Index (PPI) for final demand was flat month-on-month, coming in below market forecasts.

The July result followed a smaller reported decline in June compared to previous months. On an annual basis, headline PPI slowed to 4.7%, also below expectations and suggesting that some of the price pressures seen earlier this year are beginning to moderate.

Energy and Food Prices Decline

Goods prices provided the main downward pressure during the month. The goods index fell 0.7%, driven by declines in energy and food:

Energy prices: -3.1%
Food prices: -1.9%, the largest decline since January
Services prices: +0.2%

Services moved in the opposite direction, supported by a sharp increase in portfolio management costs. Meanwhile, transportation and warehousing prices declined for a second consecutive month.

Core Inflation Remains Elevated

Core PPI, which excludes food and energy, increased 0.2% month-on-month and remained 4.2% higher year-over-year. While underlying producer inflation is still elevated, the latest figures point to a gradual cooling in broader price pressures.

Combined with the softer CPI report released earlier, the July PPI data may strengthen the case for the Fed to postpone further monetary tightening while policymakers assess whether the recent moderation in inflation can be sustained.

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