In July, a measure of wholesale prices increased more than anticipated, bucking recent trends that indicate diminishing inflation pressures.
The producer price index, which measures the expenses that businesses receive for the goods and services they produce as opposed to the prices that consumers pay, increased 0.3% for the month, according to data released on Friday by the Bureau of Labor Statistics. That increased from a reading that remained constant in June and was the largest monthly advance since January.
Core PPI, which excludes food and energy, climbed 0.3% as well, the largest monthly increase since November 2022 after declining by 0.1% in June. The core PPI increase of 2.4% over the past year was one of the slowest increases since January 2021.
According to economists surveyed by Dow Jones, both values should have increased by 0.2%. PPI climbed 0.2% when food, energy, and trade services were excluded.
On a year-over-year basis, the headline PPI was up just 0.8%. Prices excluding food, energy and trade services moved up by 2.7% on an annual basis, unchanged from June.
Following the release of the data, markets declined, with futures for the Dow Jones Industrial Average falling by around 70 points. The benchmark 10-year note's yield increased; it was last at 4.137%, up approximately 0.06 percentage points on the day.
The index increased as a result of higher services expenses, climbing 0.5% for the month, the highest growth since August 2022. A large portion of that was caused by a 7.6% increase in portfolio management prices, which also includes fees paid for investment advice. In addition, there was a 0.7% jump in prices for trade services, along with a 0.5% increase in transportation and warehousing.
Prices for goods climbed just 0.1%, but those without regard to food or energy increased by 0.5%. Meats saw a 5% increase within the food sector. Energy was a mixed bag: Costs for many gas fuels increased, but diesel declined by 7.1%.
The BLS announced that the more frequently watched consumer price index increased by 0.2% for the month on both the headline and core readings the day before the PPI was released.
The 3.2% 12-month rate of change in the CPI was, however, a little lower than economists had predicted, supporting the argument for reducing inflation.
Officials from the Federal Reserve constantly monitor both indicators. The wholesale pricing gauge is viewed as more of a leading indicator because it examines pipeline costs for numerous goods and services, whereas the CPI frequently receives more attention.
After 11 rises totaling 5.25 percentage points since March 2022, policymakers have been debating how far they should raise interest rates. Some government representatives have recently suggested that the rate increases may be coming to a stop as inflation returns to the Fed's long-term target of 2%.
The Fed avoiding a rate hike at its September meeting has been almost universally predicted by the markets.