WASHINGTON: US wholesale prices rose less than expected last month as services costs fell, according to government data published on Tuesday.
The producer price index (PPI) rose by 0.1% in July, down slightly from a 0.2% rise in June, the labour department said in a statement.
This was slightly cooler than the median forecast of economists surveyed by Dow Jones Newswires and The Wall Street Journal.
On an annual basis, PPI came in at 2.2%, down sharply from a revised 2.7% rise a month earlier.
The news will likely be well received by the Federal Reserve, which has held interest rates at a 23-year high for the past year as it looks to bring consumer inflation down to its long-term target of 2%.
After a series of promising data results in recent months, Fed chair Jerome Powell suggested in late July that the US central bank’s rate-setting Federal Open Market Committee (FOMC) could start cutting interest rates “as soon as” September if data continues to come in as expected.
“This report will not undermine any inclination of the FOMC to cut rates in September,” economists from High Frequency Economics wrote in a note to clients. “However, it does not call out for emergency or massive rate cuts to avert an inflation undershoot, either.”
“Moderate slowing means FOMC policymakers can continue to approach subsequent rate cuts cautiously, keen to avoid reversing course due to unexpected inflation and labor market outcomes,” they added.
One point of possible concern for the Fed is that PPI excluding food, energy, and trade, actually accelerated last month.
This figure rose by 0.3% on a monthly basis, up from a 0.1% rise in June, and by 3.3% from a year ago – up from 3.2% in June.
Traders’ attention now turns to consumer inflation data published on Wednesday, which will have a more significant effect on the Fed’s thinking as it considers when to start cutting interest rates.
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