July US Producer Prices Decline 0.1%, Little Evidence Of Higher Inflation

US producer prices for final demand declined 0.1% for July which was below consensus forecasts of a 0.1% monthly increase and following a 0.1% gain for the previous month. The year-on-year increase declined to 1.9% from 2.0% previously and the lowest reading since January.

Underlying prices, excluding food and energy, also declined 0.1% on the month compared with an expected increase of 0.2% with the year-on-year increase declining to 1.8% from 1.9%.

Goods prices declined 0.1% on the month and there was a 0.2% retreat in services-sector prices, the first decline since February, as transport and warehousing prices fell 0.8%. There was evidence of lower margins within the chemicals sector.

The data overall will continue to dampen expectations of higher inflation in the economy with very little evidence of upward pressure on costs at this stage. There will be little pressure for the Federal Reserve to consider a policy tightening based on the PPI data.

The overall impact will be limited, although there will also tend to be expectations of a subdued CPI inflation release on Friday which will tend to limit dollar support.

The dollar dipped lower after the data with USD/JPY at 109.65 from 109.80 with EUR/USD at 1.1735 from 1.1725. Treasuries gain support with the 10-year contract gaining 4 ticks with the yield down to 2.23%.

Tim is a contributing author to EconomicCalendar.com. He is an economist and has been involved in financial markets for over 20 years as an analyst. He specialises in global economic trends, macro policy and central banks. Extensive knowledge, experience and data mining is used to anticipate trends in equities, bonds and forex with a contrarian slant. He is a graduate of the University of York with a degree in Economics/Econometrics.