Unexpected bad news for inflation: Wholesale prices rose in June

Wholesale price inflation unexpectedly accelerated in June to its highest rate since March 2023. That’s an unwelcome development for the US economy one day after the government announced that consumer prices declined on a monthly basis for the first time in four years. The Producer Price Index, a measurement of average price changes seen by producers and manufacturers, was 2.6% for the 12 months ended in June, unexpectedly rising from the 2.4% annual rate seen in May. On a monthly basis, prices rose 0.2% after holding flat in May. The June increase was attributed to a sharp rise in final demand services, specifically trade services margins, which soared 1.9% from May. It’s the largest monthly increase for that category since March 2022. Economists had expected that prices would increase 0.1% on a monthly basis and hold steady at 2.2% annually. When stripping out energy and food-related prices, core PPI jumped 0.4% for the month, rising 3% annually, its highest rate since April 2023. PPI serves as a potential bellwether for retail-level inflation in the months ahead. And for US consumers, inflation has been trending in a desired direction during the past couple of months. Despite a brief flare-up of price hikes in the first quarter of the year, which ultimately delayed the Federal Reserve’s plans for interest rate cuts, inflation has cooled considerably during the following three months. On Thursday, the US economy got more good news in the latest Consumer Price Index, the most widely used inflation gauge that measures the average price changes for commonly purchased goods and services. Prices dropped on a monthly basis for the first time since May 2020, and annual inflation slowed to 3%, its slowest rate since June 2023. Despite the stronger-than-expected PPI number, Bellin said he believes rate cuts are still on the table for September.