Key facts
- US producer prices were flat in July, missing forecasts for a 0.2% rebound.
- Producer goods prices declined 0.7%, while services costs rose 0.2%.
- The annual PPI increased 4.7% through July, down from 5.5% in June.
- The report supports the view that the Federal Reserve will likely keep interest rates steady.
U.S. producer prices remained unchanged in July, a flat reading that missed economists' expectations for a 0.2% rebound and followed a revised 0.1% drop in June. The Labor Department's Bureau of Labor Statistics reported that while producer goods prices fell 0.7%, the cost of services rose 0.2%. Much of the data is collected early in the month, suggesting that a late-July increase in oil prices may not have been fully reflected.
Annually, the PPI increased 4.7% in the 12 months through July, a deceleration from the 5.5% rise seen in June. The Federal Reserve monitors the Personal Consumption Expenditures (PCE) price indexes for its 2% inflation target. Following recent job losses and mild consumer inflation figures, the PPI report supports the view that the U.S. central bank will likely keep interest rates steady at its September 15-16 policy meeting. The Fed currently holds its benchmark overnight interest rate in the 3.50%-3.75% range. The dollar fell on Thursday after the data was released, leading traders to further pare back expectations of a Federal Reserve rate hike in September. Noel Dixon, senior macro strategist at State Street, stated that the data supports the case for the Fed staying on hold in September.