US producer prices held steady in July, defying expectations for a monthly rise, as energy costs continued to decline, Bureau of Labor Statistics data showed Thursday.
The producer price index was flat on a seasonally adjusted basis last month, following a 0.1% decline in June, the BLS said. The consensus in a survey compiled by Bloomberg pointed to a 0.2% rise in July.
Annually, wholesale price growth slowed to 4.7% from June's 5.5%. It marked the smallest gain since March and came in lower than the 4.9% rise projected by analysts.
Prices for final demand goods fell 0.7% month on month in July, the second consecutive month of decline. Within goods, energy dropped 3.1%, while food dipped 0.9%.
"For now, lower energy prices appear to be feeding through to a deceleration in transportation and warehousing costs, and food inflation," Grace Zwemmer, US economist at Oxford Economics, said in a report e-mailed to. "However, given the timing of the survey, we expect to see energy prices reverse some of their decline in the index in August."
Oil prices are on track for weekly gains, following two straight weekly declines, amid uncertainty around the reopening of the crucial Strait of Hormuz.
The gauge for final demand services rose 0.2%, compared with a 0.5% increase in June, BLS data showed.
The PPI report follows Wednesday's tame consumer inflation numbers that lowered bets for a Federal Reserve interest rate hike next month.
As of Thursday, markets are pricing in a 68% probability that the Fed will keep its benchmark rate steady next month, compared with 59% on Wednesday, according to the CME FedWatch tool. The odds that the US central bank will hike by 25 basis points fell to 32% from 41%.
Last month, the central bank's 12-member Federal Open Market Committee maintained the policy rate at 3.50% to 3.75% for the fifth consecutive time. However, three regional Fed presidents preferred to raise rates by a quarter percentage point.
