Bloomberg: US Producer Prices Fall for First Time Since Early in Pandemic

Graph from article

A key measure of US producer prices unexpectedly fell in July for the first time in more than two years, largely reflecting a drop in energy costs and representing a welcome moderation in inflationary pressures.

The producer price index [PPI] for final demand decreased 0.5% from a month earlier and rose 9.8% from a year ago, Labor Department data showed Thursday. The pullback was entirely due to a decline in the costs of goods, though services prices only edged up.
Excluding the volatile food and energy components, the so-called core PPI rose 0.2% from June and 7.6% from a year earlier. Both the overall and core figures were softer than forecast.

The figures suggest some pipeline inflationary pressures are beginning to ease. Commodity prices, including oil, have dropped sharply in recent months, and there are indications that supply-chain conditions are improving.

Consumer-price data out Wednesday also showed a welcome moderation in inflation in July, largely reflecting a pullback in prices at the pump. Even so, inflation remains stubbornly high and will likely keep the Federal Reserve on an aggressive path to curb it.
Goods Prices

Some 80% of the decline in goods prices was due to a 16.7% plunge in gasoline prices, the report showed. Diesel, iron and steel scrap and grains also decreased.

Services prices rose just 0.1% in July, led by an increase in fuel margins and transportation and warehousing. Meanwhile, prices for portfolio management, food and alcohol retailing and long-distance trucking declined.

Thursday’s report adds to separate data from S&P Global and regional Fed banks that showed a pullback in prices paid for inputs like materials in July.

Risks remain, however. While supply chains have started normalizing, the war in Ukraine, labor negotiations at West Coast ports and China’s zero-Covid policy represent potential logistics speed bumps for US producers.

Producer prices excluding food, energy, and trade services — which strips out the most volatile components of the index — increased 0.2% from June and 5.8% from a year earlier**
Costs of processed goods for intermediate demand, which reflect prices earlier in the production pipeline, slumped 2.3% — the most since April 2020. More than half of the drop was attributable to a plunge in diesel costs. Excluding foods and energy, these costs dropped 0.2%.

Source

Other snippets from CNBC:

Economists surveyed by Dow Jones had been expecting an increase of 0.2%

On an annual basis, the index rose 9.8%, the lowest rate since October 2021. That compares to an 11.1% [year over year] increase in June and the record 11.6% [year over year] gain in March

[This is] the first month-over-month decrease since April 2020, the month after Covid-19 was declared a pandemic

Most of the decline came from energy, which declined 9% at the wholesale level. That contributed to a 1.8% drop in prices for final demand goods

In case it causes confusion, let me emphasize that there are two 'core' PPI figures presented here.

• The main 'core' PPI which excludes food/energy increased 0.2% month over month, up 7.6% year over year
• Another similar metric strips out food, energy, and trade services. This figure also increased 0.2% month over month and is up 5.8% year over year.