US producer prices were unchanged in July, falling short of the 0.2% increase economists had expected. The Producer Price Index (PPI) declined 0.1% in June, with the drop revised from an initial 0.3% decline. Core PPI, which excludes food and energy, rose 0.2%, below the 0.3% forecast.
The data point to easing inflation pressure. Goods prices fell 0.7%, while energy prices dropped 3.1%, including a 5.7% decline in gasoline prices. Services prices rose 0.2%, while core goods prices increased 0.1%. On an annual basis, headline PPI rose 4.7% and core PPI increased 4.2%.
The report strengthened expectations for a less hawkish Federal Reserve. US stock futures moved higher after the release, Treasury yields fell, and traders further reduced bets on a September rate hike. A day earlier, consumer inflation data also showed modest price growth, with core CPI rising 0.2% in July and 2.5% from a year earlier.
The labor market is showing signs of cooling as well. Initial jobless claims rose by 9,000 to 209,000 in the week ended Aug. 8, above the 204,000 estimate. With inflation easing and labor-market conditions weakening, traders are increasingly looking past September and pricing the next Fed rate move for October or December.
