Producer Prices Edge Higher

A swing higher in energy prices held up producer prices in July which otherwise were very soft. The PPI-FD edged an as-expected 0.2 percent higher in July though prices excluding food & energy and also excluding food, energy & trade services both fell 0.1 percent to miss Econoday's consensus forecasts which were looking for 0.2 percent gains for each. Year-on-year rates held steady at 1.7 percent at the headline level but eased back for the two core readings, to 2.1 percent for ex-food ex-energy and to 1.7 percent when also excluding trade services.

Energy prices, down 4.4 percent on the year, had been falling but bounced 2.3 percent higher in July led by gasoline and also home heating oil. Food prices have been moderately firm this year, up 2.5 percent, with July coming in at a 0.2 percent gain. Trade services, which track prices at wholesalers and retailers, are up a noticeable 3.3 percent on the year with July's monthly rate up 0.2 percent.

Personal consumption measures, which in June showed pressure to correctly signal an uptick to 0.3 percent for the core PCE price index, are very soft, down 0.1 percent for ex-energy ex-food and also down 0.1 percent when trade services are also excluded. Overall, personal consumption prices managed only a 0.1 percent increase on the month.

The employment side of the Federal Reserve's mandate is very strong in contrast to the inflation side where slack is giving central bankers worldwide, not just in the US, the policy space to lower interest rates.