Producer prices, a barometer of wholesale inflation, rose modestly by 0.1% in July, according to the Bureau of Labor Statistics. That figure was lower than economists expected and offered some relief to the Federal Reserve as it navigates monetary policy.
Core producer prices, which exclude volatile food and energy components, were unchanged. On an annual basis, wholesale inflation cooled to 2.2%, down from 2.7% the previous month.
While final goods demand prices increased by 0.6%, mainly due to a spike in energy costs, this upward pressure was offset by a decline in services prices. Commercial services and wholesale margins for machinery and vehicles contracted, moderating overall price growth.
Moderate inflation data fueled speculation about the potential size of an interest rate cut at the Federal Reserve’s September meeting. However, central bank officials remained hawkish, stressing their commitment to hitting the 2% inflation target.
Despite easing wholesale price pressures, consumer sentiment data released by the New York Federal Reserve revealed growing financial strain among households. Consumer inflation expectations fell, but concerns about debt repayment and spending power rose, particularly among lower-income earners.
The interaction between wholesale and consumer price developments will continue to shape the economic outlook and the Federal Reserve’s policy decisions.
