U.S. producer prices increased less than expected in July as an energy-driven rebound in the cost of goods was tempered by cheaper services, indicating that inflation continued to moderate in support of an interest rate cut next month.
US producers’ inflation eased to +2.2%yoy in Jul-24 (Jun-24: +2.7%yoy), the lowest in 3 months and slightly below market expectations of +2.3%yoy. Services prices, which account for 67.2% of the index weightage, rose by +2.6%yoy (Jun-24: +3.5%yoy), the slowest in 5 months. Conversely, goods prices saw a +1.7%yoy uptick, the highest in 16 months. Input prices for construction rebounded to +1.4%yoy, ending 6 months of deflation. Excluding volatile price items, core producers’ inflation moderated to +2.4%yoy (Jun-24: +3.0%yoy), a 4-month low and also lower than +2.7%yoy anticipated by the market consensus. Against the previous month, the US PPI inflation softened to +0.1%mom, missing market expectations for it to remain at +0.2%mom. Core PPI was unchanged from previous month after rising +0.3%mom in the previous two months, falling short of market’s projection of +0.2%mom inflation.
The broad easing of price pressures within the supply chain signalled further moderation in the US inflation. MIDF said it now foresees the Fed will likely start easing its policy rate as soon as the next FOMC meeting in Sep-24 on the back of recent signs of slowing inflation and concerns over slowing economic growth.
