(Bloomberg) -- US producer prices climbed in June by slightly more than forecast on a pickup in margins at service providers, offsetting a second month of declines in the cost of goods.
The producer price index for final demand rose 0.2% from a month earlier, according to Bureau of Labor Statistics data published Friday. Compared with a year ago, the PPI rose 2.6%.
The report on wholesale inflation follows the more closely watched consumer price index, which showed the first decline since the onset of the pandemic and put the Federal Reserve on track to start lowering interest rates as soon as September.
The PPI report showed services costs increased 0.6%, with nearly all of the advance tied to a 1.9% jump in margins at wholesalers and retailers. Goods prices fell 0.5%.
Stripping out food, energy and trade, a less-volatile measure favored by many economists, prices were unchanged. Compared with a year ago, the gauge moderated to a 3.1% rate.
Categories in the PPI report that are used to calculate the Fed’s preferred inflation measure — the personal consumption expenditures price index — were mixed. Still, analysts at Morgan Stanley and Capital Economics shaved their core PCE price estimates after the PPI release.
Among those categories, physician care costs edged up 0.2%, the cost of hospital outpatient care rose 0.1% and inpatient care climbed 0.5% — all more modest advances than in May. At the same time, airfares increased 1.1% and prices for portfolio management services climbed 1%. The June PCE price gauge is due later this month.
“The PPI components that feed into the Fed’s preferred PCE deflator inflation measure were significantly lower than expected for June and it looks like May’s PCE gain could be revised down too, albeit only slightly,” Paul Ashworth, chief North America economist at Capital Economics, said in a note.
Costs of processed goods for intermediate demand, which reflect prices earlier in the production pipeline, fell 0.2% — the third decline in the last four months.
(Adds graphic)
©2024 Bloomberg L.P.
