–PPI -0.5%; Core +0.2%; Goods -1.8%; Services +0.1%
By Denny Gulino
WASHINGTON (MaceNews) – The July Producer Price Index, which cuts deeper and is more multidimensional than the CPI, Thursday reinforced the welcome scenario of softening inflation.
The PPI showed final demand last month dropped half a percent, more than expected and the biggest decline since March 2020. The core rate rose less than forecasters expected, 0.2%, the least since a matching number in February. The main index was 9.8% higher than July 2021
Goods sold to businesses dropped 1.8% and services prices rose just 0.1%, the least aggressive move since September of last year’s matcher.
As in the CPI published Wednesday, energy showed a huge drop for the month and foods a big increase. In fact, 80% of the drop in goods prices was attributable to gasoline.
The record annualized peak in final demand was 11.7% in March.
Without counting foods or energy, the annual change through July was 8.5%, the lowest since last September.
The improvement in the government measures may not be sustained in the months ahead. There have been several prominent forecasts of a rebound in gasoline prices expected in the months ahead. Mortgage rates rose in the latest week reported by Freddie Mac, with the 30-year back up to 5.22% after falling below 5% the previous week.
Forecasters grappling with the challenge of fitting the current historically unique set of factors influencing inflation into familiar templates have added a fudge factor, a theoretically variable Federal Reserve that periodically recalibrates its intentions. Most evidence, however, is of a Fed intent on steadily becoming restrictive enough to slow consumption while hoping factors it cannot control, like global energy prices, will also cooperate.
It’s anticipated the test of the central bank’s journey into dampening demand will commence at its next meeting in September. Up to now its policy rates, not to be confused with market rates responding to past – and discontinued – forward guidance, have been encouraging demand.
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Contact this reporter: denny@macenews.com
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