Producer Prices Flat in July as Goods Costs Fall

U.S. producer prices were unchanged in July as declining goods costs balanced out increases across services and construction, according to data released by the Bureau of Labor Statistics.

The Producer Price Index for final demand remained flat on a seasonally adjusted basis after edging down 0.1% in June and advancing 0.5% in May. Over the 12 months ending in July, unadjusted final demand prices increased 4.7%.

Excluding volatile food, energy, and trade services components, the core final demand index rose 0.4% in July following a modest 0.1% tick higher in June. On an annual basis, the index for final demand less foods, energy, and trade services gained 4.7%.

Final-demand goods prices declined 0.7% in July after falling 1.4% in June. Energy prices dropped 3.1%, led by a 5.7% decrease in gasoline. Food prices declined 0.9%, while prices for goods excluding food and energy edged up 0.1%. Those declines were offset by a 0.2% increase in final-demand services and a 2.2% advance in construction prices.

Services excluding trade, transportation and warehousing increased 0.6%. Portfolio-management prices surged 6.5%, while margins rose for several retail categories. Freight-trucking prices declined 1.8%, and trade-service margins slipped 0.1%.

The report may reduce the urgency for a September rate increase, but the strength in services and construction gives policymakers reason to remain cautious about declaring inflation contained.