Prices of food and non-alcoholic beverages slid 2.7 percent annually in July and transport cots went down by 1.4 percent. Bloomberg had a consensus estimate of 0.1%.
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U.S. producer prices rose for a third straight month in July, but inflation pressures remain benign against the backdrop of lower oil prices and a strong dollar. A key price gauge that the Fed monitors is up by just 0.3 percent over the past 12 months, reflecting the big drop in energy prices that has occurred over the past year. The U.S. dollar pared its losses versus a basket of different currencies.
The central bank’s preferred inflation gauge, the price index for personal consumption expenditures, has undershot a 2% target for more than three years.
In a preview of the data to clients, BNP Paribas economists wrote: “Prices of eggs and pharmaceutical preparations surged in June and likely retreated a bit in July”.
Eliminating food, fuel and trade services to arrive at a reading that some economists prefer because it excludes one of the report’s most volatile components, wholesale costs climbed 0.2 percent in July after rising 0.3 percent the month before.
The Federal Reserve for some time now has said that before increasing the record low interest rates which have been in place since late 2008, it needs to be “reasonably confident” that the inflation is moving back to its pre set goal of two percent.
Last month, wholesale gasoline prices rose 1.5 percent after gaining 4.3 percent in June. Fed officials have indicated they could start lifting rates as early as September if the economy continues to show signs of steady growth. For instance, food prices have fallen 3.7 percent year-over-year.
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Much of the current attention from inflation watchers has been focused on the sharp drop in energy and other commodities, as a glut of supply has collided with a slowdown in demand. The so-called core PPI was up 0.9% in the 12 months through July.
