According to the Bureau of Labor Statistics, July saw wholesale prices fall for the first-time in 2 years. This was due to a slowdown in inflation caused by a drop in energy prices.
The producer price index is a measure of final demand products’ prices. It fell 0.5% between June and April 2020. Covid-19declared to be a pandemic. Dow Jones polled economists expecting an increase in the rate of 0.2%.
Annually, the index grew 9.8%. This is the lowest level since October 2021. This compares to the 11.3% rise in June and record-breaking 11.7% gains in March.
The largest drop in prices was caused by energy. It dropped 9% wholesale and accounted to 80% of total goods price declines that fell 1.8%. The service index rose 0.1%.
PPI rose 0.2% in July without taking out food, energy, and trade services. This was lower than the 0.4% expected gain. Core PPI rose by 5.8% over a previous year.
These numbers are coming a day after consumer price index data showed inflation was flat in July, but up 8.5% compared to a year earlier. CPI eased after energy prices fell below $4 per gallon, where they had reached record levels of $5 earlier this summer.
Jeffrey Roach chief economist of LPL Financial stated, “Cooling producer prices portend a further cooling in consumer prices as they are further up inflation pipelines.” We expect that producer prices will fall as more supply chains are developed. For improved supply chains to have an impact on prices for end consumers, it could take as long as three months.”
Federal Reserve officials will closely examine the inflation data for clues to the state of the economy after more that a year in which high inflation has been a constant problem.
Prices had reached their highest level in over 40 years before July’s easement. High levels of fiscal and monetary stimulus, supply-chain issues and demand imbalances caused by the pandemic, had pushed the annual CPI rates past 9%. That’s well over the Fed’s goal of 2%.
The Fed could use this week’s data to reduce rate hikes that were made in consecutive 0.75 percentage points increments between June and July. The market is now anticipating a move of 0.5 percent in September.
Separate Labor Department reports Thursday revealed that weekly claims for unemployment totaled 262,000 in the week ending Aug. 6. This is an increase of 14,000 over the previous week, but 2,000 less than the estimate.
In recent weeks, claims have risen in an indication that the labor market has changed from its previous tight state. The number of continuing claims increased by 8,000 to 1.43 Million