U.S. producer prices held steady in July, the Bureau of Labor Statistics reported Thursday, coming in below the 0.2 percent monthly increase economists had forecast and providing further evidence that inflation pressures are easing ahead of the Federal Reserve’s September policy meeting.
The flat reading for the Producer Price Index followed a 0.6 percent increase in June and a 1.1 percent jump in May, marking a sharp deceleration in wholesale price growth. On an unadjusted basis, the index for final demand rose 5.5 percent for the 12 months ended in July.
Goods prices fell during the month, led by declines in energy and food costs, while the price of services increased only marginally. The retreat in crude oil prices, which had surged earlier this year amid Middle East tensions, was a key driver of the soft goods reading.
“Headline PPI was cooler than expected, with declines in energy prices, food prices, and energy-sensitive services such as air and truck transportation,” said Bill Adams, chief U.S. economist at Fifth Third Commercial Bank. He noted that core PPI came in roughly in line with expectations, though certain components carry upward implications for the upcoming personal consumption expenditures index.
Portfolio management services jumped 6.5 percent on the month and are up 22.5 percent on the year, tracking closely with stock market gains. Adams flagged this as a potential upward contribution to core PCE inflation in the next release, though he noted the effect would be revised down in September when the BEA makes annual revisions.
The benign PPI data followed Wednesday’s consumer price report showing CPI eased to a 3.4 percent annual rate in July, down from 3.5 percent in June. Together, the two inflation gauges have strengthened the case for the Fed to maintain its current policy stance.
Traders in fed funds futures now price in a 65 percent probability that the central bank will hold rates at its September meeting, up from 60 percent before the PPI release. The Fed has kept rates elevated this year to combat inflation that spiked earlier in 2026 amid the energy price surge triggered by the Middle East conflict.
The data arrives at a delicate moment for the U.S. economy. While inflation is trending lower, the labor market showed signs of softening in the July jobs report, and global demand faces headwinds from geopolitical uncertainty. The Fed must balance these crosscurrents as it weighs whether its next move will be a pause, a cut, or another hike.
Sources: Detroit News | TheStreet | Bureau of Labor Statistics
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