The annual growth of the producer price index (#PPI ) in June was 2.3% - significantly lower than the forecast 2.7% and weaker than analysts' expectations.
That's a weak result for wholesale prices. Economists had expected a 0.2% increase from May, but the Bureau of Labor Statistics (#BLS ) showed little change.
Same story with the core PPI, which excludes food and energy. It was also predicted to rise by 0.2%, but it stayed flat. Not up, not down. Just zero. That adds intrigue to the inflation picture – especially against the backdrop of fresh consumer price index (CPI) data.
Goods have become more expensive, but services have become cheaper
Prices for goods rose by 0.3%, with telecommunications equipment standing out in particular, up 0.8%. This segment is sensitive to tariffs and trade restrictions. Services fell by 0.1%, and they form the lion's share of the US economy.
Meanwhile, the Bureau of Labor Statistics revised its May data. The index rose 0.3%, not 0.1% as previously reported. It's a small change, but it's the sharpest jump in wholesale prices since February. The core index, which excludes food and energy, also gained 0.3% in June — so there's movement in the economy, even if the headlines don't show it.
Despite the static final figure in June, some segments of the economy are clearly continuing to move.
On an annual basis, the overall PPI index was 2.3%, up from 2.7% in May. Yes, that's still above the Fed's 2% target, but inflationary pressures are easing.
Trump Demands Rate Cuts, But Markets Don't React
Immediately after the inflation report was released, Donald Trump again called on the Fed to lower interest rates. In his opinion, this will help both businesses and households. But the markets do not believe it. And the latest statistics only confirm this, because there is no reason for this now.
Traders have already priced in a zero chance of a rate cut in July. Even in September, the chances of a rate cut are diminishing. The Fed is not changing its rhetoric. Officials continue to act with caution. They want to wait to see how the tariffs will affect them before changing anything. For now, the regulator believes that the US economy can handle the load.
Returning to the PPI, energy prices rose by 0.6% in June, while food prices rose by 0.2%. But one category stood out in particular: eggs. They fell by 21.8% in just one month.
According to the UK Office for National Statistics (ONS), the annual inflation rate in June was 3.6%, against expectations of 3.4%. This is the second month in a row when reality has beaten forecasts. Core inflation also accelerated, from 3.5% in May to 3.7%.
Against this background, the picture in the US looks a little calmer, but far from ideal. Yes, CPI and PPI turned out to be slightly lower than expected, but they are still high and the market feels it.
As Matthew Ryan, head of strategy at Ebury, noted:
"The latest U.S. inflation report has all but confirmed that the June price increase is due to President Trump's tariffs."
