June Producer Prices Flat?Is Inflation Finally Cooling?

A day after the Consumer Price Index reignited concerns over sticky inflation, Wednesday's Producer Price Index (PPI) offered a more benign view.

Producer prices were flat in June, down from May's upwardly revised 0.3% increase and coming in below the 0.2% consensus estimate. On an annual basis, PPI slowed to 2.3%, the lowest since September 2024, also weaker than the expected 2.5% and down from 2.7% in May.

Core PPI, which strips out food and energy, also was also flat during the month, softer than the 0.2% forecast. The year-over-year rate cooled to 2.6% from an upwardly revised 3.2% previously, and 0.1 percentage point below the economist consensus.

Communication equipment led gains, rising 0.8%. Prices for gasoline, electricity, poultry, meat, and tree nuts also increased. Chicken egg prices plunged 21.8%. Plastics and natural gas liquids declined.

Service prices slipped 0.1% in June, after a 0.4% rise in May. Core services fell 0.1%. Transportation dropped 0.9%, while trade margins were flat.

Hotel prices dropped 4.1%, leading the decline. Auto retailing, airline fares, and deposit services also fell. Portfolio management fees increased by 2.2%, driven by gains in machinery and apparel retailing.

The softer PPI print comes just one day after headline CPI inflation surged to 2.7%?its highest level since February?and monthly CPI rose 0.3%, marking the biggest increase in five months.

That report gave political cover to Fed Chair Jerome Powell, who has resisted President Donald Trump's demands for immediate rate cuts.

Market Reactions

Futures on major US indices edged up in the premarket trading Wednesday. Contracts on the S&P 500 were 0.3% higher by 8:35 a.m. in New York.

On Tuesday, the S&P 500 ? as tracked by the Vanguard S&P 500 ETF ? reached fresh record highs during the session but closed 0.4% lower.

The U.S. dollar index ? as closely represented by the Invesco DB USD Index Bullish Fund ETF ? slipped 0.1%.

Treasury yields slipped after cooler-than-expected producer price data eased concerns about building inflation pressures.

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