Wholesale Prices Up Slightly More Than Expected

A rise in costs for trade services pushed wholesale prices up slightly more than expected in July though trends are not pointing to sustained pressure. The PPI-FD rose 0.2 percent with the year-on-year a little bit deeper in the negative column at minus 0.8 percent. Excluding food & energy, prices rose 0.3 percent which looks high but the year-on-year rate actually slowed to plus 0.6 percent from 0.8 percent. Trade services rose 0.4 percent in the month but here too the year-on-year rate shows no threat, down 2 tenths to plus 0.6 percent. Energy prices fell 0.6 percent in July and further declines for the August report are in the cards given the ongoing drop in oil prices. Year-on-year, energy prices are down 17.6 percent. Food prices also fell, down 0.1 percent for a year-on-year minus 2.8 percent. Finished goods prices fell 0.1 percent with the year-on-year rate at minus 2.6 percent, but there is some pressure in this component with cars up 0.6 percent in the month and light trucks up 0.7 percent. Price traction here reflects strength in vehicle sales. Fed policy makers have been waiting for the prior effects of the oil collapse to fade and for year-on-year trends to improve to their 2 percent policy target. But is that happening? With oil prices buckling to new lows, the hawks aren't going to be finding much pressure in wholesale prices to justify an immediate rate hike. Next inflation report will be Wednesday with consumer prices.

Recent History Of This Indicator The PPI-FD is expected to cool in July, up only 0.1 percent for both the total reading and the ex-food ex-gas core reading. The report in June showed unusual gains but it failed to provide much lift to year-on-year rates where the overall was at minus 0.7 percent and the core at only plus 0.8 percent.