US producer inflation cooler than expected in July

SAN RAFAEL, CALIFORNIA – APRIL 12: Customers shop for eggs at a Sprouts grocery store on April 12, 2023 in San Rafael, California. According to a report by the Bureau of Labor Statistics, inflation in March slowed to its lowest rate in nearly two years with prices rising 5 percent, down from 6 percent in February. (Photo by JUSTIN SULLIVAN / GETTY IMAGES NORTH AMERICA / Getty Images via AFP)

US wholesale prices rose less than expected last month as services costs fell, according to government data published Tuesday.

The producer price index (PPI) rose by 0.1 percent in July, down slightly from a 0.2 rise in June, the Labor Department said in a statement.

This was slightly cooler than the median forecast of economists surveyed by Dow Jones Newswires and The Wall Street Journal.

READ: US wholesale prices unexpectedly dropped in May

On an annual basis, PPI came in at 2.2 percent, down sharply from a revised 2.7 percent rise a month earlier.

The news will likely be well received by the Federal Reserve, which has held interest rates at a 23-year high for the past year as it looks to bring consumer inflation down to its long-term target of two percent.

After a series of promising data results in recent months, Fed Chair Jerome Powell suggested in late July that the US central bank could start cutting interest rates “as soon as” September, if data continue to come in as expected.

Despite the headline figure, there was a wrinkle in the more granular data, with the PPI measure stripping out food, energy, and trade accelerating last month.

This figure rose by 0.3 percent on a monthly basis, up from a 0.1 percent rise in June, and by 3.3 percent from a year ago — up from 3.2 percent in June.

Traders’ attention now turns to consumer inflation data published Wednesday, which will have a more significant effect on the Fed’s thinking as it considers when to start cutting interest rates.