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U.S. producer prices stay flat in July, rate-hike odds cool
July’s Producer Price Index was unchanged, while goods fell 0.7% and services rose 0.2%, reinforcing expectations the Fed may hold rates next month.
U.S. producer prices were unchanged in July, with goods prices declining while the cost of services ticked up, according to a Labor Department report covered by Reuters. The flat reading followed a revised 0.1% drop in June and came after Wednesday’s news on mild consumer inflation.
The data further shifted market expectations away from a near term Federal Reserve rate hike, Reuters said. Financial markets had been pricing in a hike, but the odds have diminished following last week’s employment report that showed unexpected job losses in July.
Reuters reported that economists expect moderate readings in the Personal Consumption Expenditures price indexes for July, a key measure the Fed uses for its 2% target. The FOMC has August CPI and employment reports before its September meeting, and economists polled by Reuters said the likelihood of an immediate hike has fallen.
In the details, goods prices fell 0.7% after sliding 1.4% in June, with energy down 3.1%. Food prices declined 0.9%, including a sharp drop in wholesale lettuce prices, while the core PPI, which excludes food, energy and trade services, rose 0.4% in July and increased 4.7% over the past 12 months.