U.S. Producer Prices Increase as Drag From Oil Eases

Overall producer prices were down 0.8 per cent in July from a year earlier, while core prices were up only 0.6 per cent. It was the first decrease in the goods index since April. The dollar pared losses against a basket of currencies.

A strong dollar and weaker oil prices are keeping a lid on inflation, which has some economists believing that the Federal Reserve will be hesitant to raise interest rates next month.

The central bank’s preferred inflation gauge, the price index for personal consumption expenditures, has undershot a 2% target for more than three years.

Economists have estimated that the 10% drop in the yuan versus the dollar could shave one-tenth of the percentage point from inflation in the U.S. over the next 12 months.

The dollar has gained 15.7 percent against the currencies of the United States’ main trading partners since June 2014.

In July, prices of wholesale gasoline were up 1.5% after June gains of 4.3%. Egg prices, which had been surging because of the avian flu outbreak, reversed and fell 24.2 per cent. Energy prices were down 0.6 per cent after two months of gains. Food prices increased 0.6 per cent in June.

In a preview of the data to clients, BNP Paribas economists wrote: “Prices of eggs and pharmaceutical preparations surged in June and likely retreated a bit in July”.

The volatile trade services component, which mostly reflects profit margins at retailers and wholesalers, rose 0.4% in July after increasing 0.2% in the prior month.

Producer prices climbed 0.2 percent in July, seasonally adjusted, according to the U.S. Bureau of Labor Statistics, attributable to an increase in prices for final demand services, which climbed 0.4 percent.

A key price gauge that the Fed monitors is up by just 0.3 percent over the 12 months ending in June, reflecting the big drop in energy prices that has occurred over the past year.

This article was written by Lucia Mutikani from Reuters and was legally licensed through the NewsCred publisher network.