The numbers: The U.S. producer price index rose 0.3% in July, the Labor Department said Friday, up from a revised flat reading in June and the largest gain since January.
Economists polled by The Wall Street Journal had forecast a 0.2% advance.
The core producer price index, which excludes volatile food, energy prices, and trade services rose 0.2 in July, up from a 0.1% gain in the prior month. This is the largest increase since February.
Key details: Over the past year, headline producer price inflation was running at a 0.8% rate in July, up from 0.2% in the prior month.
Core prices are up 2.7% from a year earlier, matching the gain in June. Core PPI prices were running at a 5.8% rate in July 2022.
A big part of the increase in producer prices was in the services sector.
The cost of services rose 0.5% last month, up from a 0.1% drop in June. This is the largest increase in a year. The increase was led by a 7.6% gain for portfolio management.
The cost of goods rose 0.1% in July after a flat reading in the prior month.
Energy prices were flat in July, down sharply from a 0.7% gain in the prior month.
Wholesale food prices jumped 0.5% after a 0.2% fall in the prior month.
Further back on the production line, prices for intermediate goods fell 0.6%, the sixth straight monthly decline.
Big picture: Price pressures have been diminishing at the producer level much faster than at the consumer level. Economists are watching the inflation data closely to see if the July interest rate hike by the Federal Reserve was the last hike of the cycle.
What are they saying? “In short, PPI surprised to the upside in July. While we do not expect further rate hikes this year, if inflation surprises to the upside and the labor market and growth do not slow, another increase in interest rates cannot be ruled out in 2023,” said Rubeela Farooqi, chief U.S. economist at High Frequency Economics.
Market reaction: U.S. stocks
DJIA
SPX
were set to open lower on Friday after the stronger-than-expected PPI data. The yield on the 10-year Treasury note
BX:TMUBMUSD10Y
rose to 4.12%.
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