The producer-price index, measuring what companies pay other firms for goods and services ranging from dairy products to warehousing, fell a seasonally adjusted 0.4% in July from a month earlier, its largest one-month fall since September 2015, the Labor Department said Friday.
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As I pointed out in the preview, the year on year import prices are still clawing back from the negative.
Last month’s gain came despite the dollar rising in July against the currencies of the United States’ main trading partners after losing some steam early in the year. Non-agricultural prices that improved more than offset a decline in agricultural prices.
This was the first decline in wholesale prices in four months and follows a sharp 0.5% jump in June. The Labor Department will release the July CPI reading next week. After declining in 2015 and early this year, the price index has increased for five straight months.
The price of goods imported into the USA unexpectedly rose in July, the fifth straight monthly increase, led by non-fuel items, the Bureau of Labor Statistics said in a report on Thursday.
Imported consumer goods prices excluding automobiles dipped 0.1 percent.
Prices have rise for the last 5 months with a cumulative gain of 3.0%, while the annual decline has slowed to 3.7%. Oil prices are now below $45 per barrel. Oil prices at the end of July were slightly above January’s lows.
The last time the index increased more than 0.3% was in March 2012. The Fed has been counting on inflation to slowly rise as a sign the economy is growing at a healthy pace and can withstand an increase in interest rates, which the central bank has kept historically low since the recession to stimulate growth.
Some of the factors that should contribute to firming inflation are present. The Fed left interest rates unchanged at its meeting last month but noted that risks to the US economic outlook have diminished, opening the possibility of rate hikes later in the year. “That’s probably my primary concern”.
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Excluding the volatile categories of food, energy and trade, core prices were flat in July after a 0.3% gain in June.
