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Economy in Brief

U.S. Producer Prices Fall During July; Core Increase Weakens
by Tom Moeller  August 11, 2022

• Energy price decline is first since April 2020.

• Core goods price increase eases.

• Services price rise negligible.

The Producer Price figures for July from the Bureau of Labor Statistics compliment yesterday's Consumer Price report, showing that pricing power has weakened. The Producer Price Index for Final Demand fell 0.5% during July following a 1.0% June rise, revised from 1.1%. The May increase of 0.8% was revised from 0.9%. During the last 12 months, the increase slowed to 9.8% from an 11.7% March peak. A 0.3% July increase had been expected in the Action Economics Forecast Survey.

The Producer Price Index less food, energy & trade services increased 0.2% (5.8% y/y) after an unrevised 0.3% June gain. The PPI less food & energy rose an expected 0.2% (7.6% y/y) after rising 0.4% in June.

The decline in the July PPI was led by a 9.0% drop (+36.8% y/y) in energy prices, the first decline since December. Gasoline prices fell 16.7% (+48.9% y/y) after an 18.2% June surge. Home heating oil prices weakened 11.6% (+77.9% y/y) following a 5.3% June increase. Natural gas costs eased 2.3% (+29.9% y/y) after increasing 6.5% in June while electric power costs improved 0.4% (12.3% y/y) following a 1.9% jump.

Food prices strengthened 1.0% (15.0% y/y) in July after easing 0.2% in June. Beef & veal prices surged 9.5% (-4.4% y/y) following a 1.7% June gain. Dairy product prices fell 0.4% (21.3% y/y) after improving 0.5%. Fresh & dried vegetable prices rose 12.7% y/y in July while egg prices strengthened 171.5% y/y.

The PPI for goods less food & energy improved 0.2% (8.5% y/y) in July after a 0.4% June rise. Finished consumer goods prices less food & energy increased 0.6% (8.4% y/y) for a second straight month. Durable consumer goods prices were 0.5% higher (8.1% y/y) and core nondurable consumer goods prices rose 0.7% (8.5% y/y). Prices for private capital equipment strengthened 0.5% (9.1% y/y) after rising 0.8% in June.

Services prices improved 0.1% (6.9% y/y) in July after a 0.3% June gain. Trade services prices rose 0.3% (13.7% y/y), the weakest increase in three months. Services prices less trade, transportation & warehousing eased 0.1% (+2.1% y/y) after rising 0.2% in June.

Construction product prices surged 5.1% in July (23.1% y/y), the strongest increase in nine months. Construction product prices for private capital investment rose 5.4% (25.3% y/y) and for government construction costs increased 4.4% (19.1% y/y).

Intermediate goods prices declined 2.3% (+17.4% y/y) in July following four straight months of 2.0%, or more, gains. Processed fuel costs fell 9.0% (+40.5% y//y) and reversed their June increase.

The PPI data are published by the Bureau of Labor Statistics and can be found in Haver's USECON database. Further detail is contained in PPI and PPIR. The expectations figures are available in the AS1REPNA database.

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