The US Producer Price Index held steady in July following a 0.1% decrease in June, compared with the 0.2% gain expected in a survey compiled by Bloomberg as of 7:30 am ET.
Energy prices fell by 3.1% in the month with a 9.8% decrease in natural gas liquids, a 6.7% decrease in diesel fuel, and a 5.7% decrease in gasoline prices. Food prices decreased by 0.9%.
After excluding food and energy prices, core PPI rose by 0.2%, below the 0.3% gain expected and slower than a 0.4% gain in the previous month.
PPI was up 4.7% year-over-year in July while core PPI increased by 4.2% year-over-year, both slower than their respective June rates. The year-over-year rate for PPI excluding food, energy and trade services decreased to 4.7% from 5% in the previous month,
The monthly producer price index, or PPI, reported by the Bureau of Labor Statistics measures the index level of prices received by producers for products such as energy, food, vehicles, and services. The core measure, excluding the volatile food and energy components, is a measure of underlying inflation.
Sharply higher prices are a sign of demand, but an increase at the producer level without a pass-through to the consumer level would suggest smaller profits at the retail level. As a result, the stock reaction depends on the movements at both levels. Higher inflation is generally a negative for bonds.