US producer prices unchanged in June
An increase in the cost of goods was offset by weakness in services
[WASHINGTON] US producer prices were unexpectedly unchanged in June as an increase in the cost of goods because of tariffs on imports was offset by weakness in services.
The unchanged reading in the producer price index for final demand last month followed an upwardly revised 0.3 per cent rise in May, the Labor Department’s Bureau of Labor Statistics said on Wednesday (Jul 16). Economists polled by Reuters had forecast the PPI rising 0.2 per cent, after a previously reported 0.1 per cent gain in May.
In the 12 months through June, the PPI increased 2.3 per cent after advancing 2.7 per cent in May. Data on Tuesday showed consumer prices picking up in June, with solid gains in tariff-exposed goods like household furnishings and supplies, appliances, sporting goods and toys as well as windows, floor coverings and linens.
Economists said June’s Consumer Price Index report was likely the start of the tariff-induced increase in inflation from the import duties announced in April.
But some expected slower services price growth because of softening demand for travel and hotel accommodation to partially offset the boost to inflation from tariffs.
President Donald Trump last week announced higher duties would come into effect on August 1 for imports from a range of countries, including Mexico, Japan, Canada and Brazil, and the European Union. Economists expected these tariffs would keep goods prices elevated through the end of the year.
The Federal Reserve is expected to leave its benchmark overnight interest rate in the 4.25 per cent-4.50 per cent range at a policy meeting later this month. Minutes of the central bank’s June 17-18 meeting, which were published last week, showed only “a couple” of officials said they felt rates could fall as soon as the July 29-30 meeting.
Prior to the PPI report, economists estimated that the Personal Consumption Expenditures (PCE) Price Index, excluding the volatile food and energy components, increased 0.3 per cent in June after rising 0.2 per cent in May. The so-called core PCE inflation was forecast to have advanced 2.8 per cent on a year-over-year basis last month, after climbing 2.7 per cent in May. The core PCE price index is one of the inflation measures tracked by the US central bank for its 2 per cent target. REUTERS
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