After consumer price inflation slowed faster than expected yesterday, all eyes are on the pipeline with producer price inflation expected to slow to just +0.4% YoY in June. Instead it fell further (+0.1% MoM), with PPI barely positive on a YoY basis (+0.1%)...
Source: Bloomberg
That is the slowest headline YoY PPI print since August 2020.
Under the hood, we note that core PPI (ex Food, Trade, & Energy) rose 2.6% YoY - the slowest since Feb 2021...
Final demand services: The index for final demand services increased 0.2 percent in June, the same as in May.
- Leading the June advance, prices for final demand services less trade, transportation, and warehousing moved up 0.3 percent. Margins for final demand trade services rose 0.2 percent. In contrast, the index for final demand transportation and warehousing services decreased 0.9 percent.
Product detail:
A 5.4-percent advance in the index for deposit services (partial) was a major factor in the June increase in prices for final demand services.
The indexes for food and alcohol retailing, traveler accommodation services, insurance, hospital inpatient care, and airline passenger services also moved higher.
Conversely, prices for truck transportation of freight declined 2.1 percent. The indexes for food and alcohol wholesaling and for residential real estate loans (partial) also fell.
Final demand goods: Prices for final demand goods were unchanged in June after decreasing 1.6 percent in May.
In June, a 0.7-percent rise in the index for final demand energy offset falling prices for final demand goods less foods and energy and for final demand foods, which declined 0.2 percent and 0.1 percent, respectively.
Product detail:
Within the index for final demand goods in June, prices for gasoline rose 3.4 percent.
The indexes for electric power; beef and veal; chicken eggs; and medical, surgical, and personal aid devices also moved higher.
In contrast, prices for iron and steel scrap dropped 10.8 percent. The indexes for diesel fuel, oilseeds, industrial chemicals, and residual fuels also decreased.
The pipeline for PPI signals further deflation is imminent with intermediate demand goods prices down over 9% YoY - worse than the trough of the COVID lockdowns...
Source: Bloomberg
This appears to be further 'good news' for The Fed (and the bulls)... or is the deflationary pressure a signal of recession?
