U.S. wholesale prices held flat in July, coming in below economists’ expectations and adding to fresh evidence that inflation pressures across the economy are easing.
The Labor Department’s producer price index, which measures inflation before it reaches consumers, was unchanged from June to July. That figure fell short of the 0.2% monthly increase forecast in a Dow Jones consensus survey, and followed a 0.1% decline the previous month.
On an annual basis, wholesale prices rose 4.7% in July, down sharply from a 5.5% increase in June. The moderation was driven largely by falling gasoline and food costs, with gas prices unwinding some of the spike triggered by the earlier conflict involving Iran.
The producer price index is closely watched because it captures cost pressures in the guts of the economy before they filter through to households. A cooling in wholesale prices often signals that consumer inflation could grind lower in the months ahead.
The data followed the government’s consumer price inflation report released the previous day, which similarly showed a modest cooling. Together, the two readings point to a broad-based slowdown in the rising cost of living.
Still, the picture remains mixed for many households. Consumer prices have risen faster than wages for the past four months, squeezing family budgets even as the overall pace of inflation decelerates.
Analysts caution that the improvement may prove uneven. Gasoline prices climbed again in late July and early August, raising the prospect that headline inflation could tick back up when August figures are published next month.
The latest numbers arrive as recent readings have shown a broader easing in the pace of U.S. inflation, giving policymakers more room to weigh the timing of interest rate decisions.
Attention now turns to the Federal Reserve, which is monitoring incoming data for confirmation that price pressures are sustainably subsiding before adjusting its policy stance. The August inflation reports, due next month, are expected to shape those deliberations.