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US Producer Price Data Shows Easing Inflation Pressure

POSTED ON July 13, 2024 •   Business      BY Abiodun Saheed Omodara
People display merchandise for pedestrians around Times Square, in New York, U.S., December 25, 2023. l Credit: REUTERS

US producer prices rose slightly in June, more than expected due to an increase in the cost of services, but this did not change the anticipation of the Federal Reserve potentially reducing interest rates in September. 

The components of the producer-price report, particularly healthcare services, which are used to calculate key inflation measures for US monetary policy, were largely positive last month.

Combined with the milder readings in the consumer price report, economists predicted favorable readings in the personal consumption expenditures (PCE) inflation for June.

Chief economist Christopher Rupkey stated that there seems to be minimal inflation pressure affecting consumer prices at retail locations.

According to the Labor Department's Bureau of Labor Statistics, the producer price index for final demand increased by 0.2% in June, exceeding the forecasted 0.1% rise.

Over the 12 months leading up to June, the PPI saw a 2.6% increase, the largest year-on-year gain since March 2023.

The rise in the PPI was driven by a 0.6% increase in service prices, with trade services experiencing a 1.9% surge in margins.

However, transportation and warehousing service costs declined by 0.4%. Portfolio management fees rose by 1.0%, partially reversing a previous 0.8% decrease.

Airline fares went up by 1.1%, offsetting most of the 3.9% decrease in May, while hotel and motel room costs decreased by 0.2%.

The cost of medical services also showed mild changes, with a 0.4% drop in doctor services costs.

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