US PPI comes in softer than expected, confirms easing inflation pressure

US producer prices cool more than expected in July.
Annual producer inflation slows sharply to 4.7% from 5.5% in June, also undershooting forecasts.
The data reinforce signs of easing US inflation pressure after Wednesday’s softer consumer inflation figures.

Ghiles Guezout FXStreet

Producer inflation in the United States (US) cooled more than expected in July, adding to evidence that inflationary pressure is gradually easing after Wednesday's Consumer Price Index (CPI) data.

The US Producer Price Index (PPI) came in unchanged on a monthly basis in July, following a revised 0.1% decline in June. Markets had expected producer prices to increase by 0.2%.

On an annual basis, the PPI hit 4.7% in July, slowing markedly from 5.5% in June and coming below the 4.9% increase expected by economists.

Underlying inflationary pressure also moderated. The core PPI, which excludes more volatile components, increased 0.2% MoM in July, down from a revised 0.4% in June and below the 0.3% market consensus. On a yearly basis, the core PPI slowed to 4.2% from 4.7%, matching expectations.

Overall, the weaker-than-expected producer inflation report reinforces the disinflationary signal delivered by Wednesday's CPI figures. The combination of softer consumer and producer price pressure could strengthen expectations that inflation in the US is moving in a direction more favorable to near-term monetary policy holds by the Federal Reserve (Fed).

Market reaction

The US Dollar Index (DXY), which tracks the value of the US Dollar (USD) against a basket of six major currencies, remains under pressure following the release, losing 0.04% on Thursday and trading around 99.93 at the time of writing.

Economic Indicator

Producer Price Index (YoY)

The Producer Price Index released by the Bureau of Labor statistics, Department of Labor measures the average changes in prices in primary markets of the US by producers of commodities in all states of processing. Changes in the PPI are widely followed as an indicator of commodity inflation. Generally speaking, a high reading is seen as positive (or bullish) for the USD, whereas a low reading is seen as negative (or bearish).

Economic Indicator

Producer Price Index ex Food & Energy (YoY)

The Producer Price Index ex Food & energy released by the Bureau of Labor statistics, Department of Labor measures the average changes in prices in primary markets of the US by producers of commodities in all states of processing. Those volatile products such as food and energy are excluded in order to capture an accurate calculation. Generally speaking, a high reading is seen as positive (or bullish) for the USD, whereas a low reading is seen as negative (or bearish).

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