U.S. producer prices flat in July, matching forecasts

U.S. producer prices were unchanged in July, matching economist expectations and signaling a pause in wholesale inflation pressures.

The Labor Department's Producer Price Index (PPI) for final demand held steady at 0.0% month-over-month, following a revised 0.2% decline in June, according to data released on Friday. On an annual basis, the PPI rose 2.2%, down from 2.7% in June and the slowest pace since March 2021.

Core PPI, which excludes volatile food and energy components, increased 0.1% from June, slightly below the 0.2% forecast. The year-over-year core measure edged up to 2.4% from 2.6%.

Prices for goods fell 0.2% in July, driven by a 5.4% drop in energy costs, while food prices rose 0.5%. Services costs were up 0.2%, with trade services and transportation contributing to the gain.

The data suggests that while some inflationary pressures persist, particularly in services, the overall trend remains subdued. This could provide the Federal Reserve with further justification to consider rate cuts in the coming months, though policymakers have emphasized a data-dependent approach.

Market reaction was muted, with U.S. Treasury yields little changed and the dollar holding steady against major peers. Traders maintained bets on a September rate cut, with the probability of such a move holding near 70%, according to CME Group's FedWatch tool.

Economists noted that the PPI reading aligns with broader disinflation trends but cautioned that services inflation remains sticky, a key focus for the Fed as it assesses the timing of policy easing.