By Alice Seeley
The U.S. Department of Labor announced on Aug. 11 that U.S. producer prices fell unexpectedly last month. This is the first time producer prices have fallen since April 2020.
In July, the Producer Price Index (PPI) for final demand decreased by 0.5% from June. However, the PPI is still 9.8% higher than in July 2021. The core PPI rose by 0.3% from June to July and 7.6% from a year before.
Economists surveyed by Reuters were correct in predicting that the PPI would increase by 0.2% last month but were wrong in forecasting that it would increase 10.4% from a year earlier.
Citigroup Inc. economists Veronica Clark and Andrew Clark were surprised at this decline.
“A moderation in goods prices in the second half of this year has been widely expected for some time, and other details of services prices in PPI were somewhat surprisingly strong,” Clark and Hollenhorst stated. “This keeps us focused on still-strong underlying price pressures, particularly for services related to a tight labor market.”
In addition, the prices of goods declined by 1.8% in July after climbing to 2.3% a month earlier. Food prices increased by 1% in July after falling by 0.2% in June, and the total cost of services increased by 0.1% in July. This is the smallest increase in the cost of services in the last three months.
Besides the food, energy, and trade categories, producer prices rose by 0.2% from June to July and 5.8% from July 2021. The costs of processed goods available for intermediate demand dropped by 2.3% in July, the biggest decline since April 2020.
