In July, US wholesale inflation slowed as expected, following a surprising increase the previous month. This development precedes a critical upcoming report on consumer price changes. The Producer Price Index (PPI) rose by 2.2% year-over-year, down from June’s 2.7% increase, with a monthly rise of just 0.1%, compared to 0.2% in June. This slowdown is seen as a positive sign by investors, with significant stock market gains following the announcement.
The PPI, which tracks price changes before they reach consumers, hints at future retail-level inflation trends. A key upcoming report is the Consumer Price Index (CPI), due on Wednesday, which will provide a more direct insight into the inflation affecting consumers.
Despite the modest increase in overall PPI, driven by a 0.6% rise in goods prices, service prices actually fell by 0.2%, influenced by a drop in trade services. Excluding volatile food and energy prices, core PPI was flat for the month, marking the lowest annual increase since March at 2.4%.
This week’s inflation data, including the upcoming CPI report, is under particular scrutiny following last week’s weak job report that impacted markets. The CPI is expected to show a continued, though gradual, decrease in inflation, with analysts predicting a 0.2% monthly increase and a steady annual rate of 3%.
Economists are closely monitoring shelter inflation, a major inflation driver that has shown signs of slowing recently. The outcome of these reports will help shape expectations for future economic policy, including potential rate cuts by the Federal Reserve later this year.
