---
title: "Service costs decline for the first time this year, US July PPI cools more than expected! Traders increase bets on a 50 basis point rate cut in September"
type: "News"
locale: "en"
url: "https://longbridge.com/en/news/211462066.md"
description: "The U.S. Producer Price Index (PPI) for July rose less than expected, reflecting the first decline in service costs this year as inflation pressures continue to ease. Service costs fell by 0.2%, indicating a decrease in profit margins for machinery and automobile wholesalers. Meanwhile, commodity prices rose by 0.6%, marking the largest increase since February, driven mainly by higher food and gasoline prices. PPI data is released before the more closely watched Consumer Price Index (CPI), with the market generally expecting a slight increase in CPI to be announced on Wednesday. Traders are increasing their bets on a 50 basis point rate cut in September, with the probability exceeding 50%"
datetime: "2024-08-13T13:35:03.000Z"
locales:
  - [zh-CN](https://longbridge.com/zh-CN/news/211462066.md)
  - [en](https://longbridge.com/en/news/211462066.md)
  - [zh-HK](https://longbridge.com/zh-HK/news/211462066.md)
---

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# Service costs decline for the first time this year, US July PPI cools more than expected! Traders increase bets on a 50 basis point rate cut in September

According to the Zhitong Finance APP, the US Producer Price Index (PPI) for July rose less than expected, reflecting the first decline in service costs since the beginning of the year amid continued easing inflationary pressures.

A report released by the US Bureau of Labor Statistics on Tuesday showed that the PPI representing final demand rose by 0.1% from the previous month, with economists' median forecast at 0.2%. Compared to a year ago, the PPI increased by 2.2%.

Excluding the volatile food and energy categories, the July PPI remained unchanged from the previous month, marking the mildest reading in four months. The core PPI rose by 2.4% year-on-year.

![image.png](https://imageproxy.pbkrs.com/https://img.zhitongcaijing.com/image/20240813/1723555151740955.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg)

PPI data is released ahead of the more closely watched Consumer Price Index (CPI), with market expectations generally anticipating a slight increase in the CPI to be announced on Wednesday. Against the backdrop of receding inflationary pressures, the weak July employment data has led economists to predict that the Federal Reserve will begin a series of interest rate cuts starting next month.

Following the release of the data, the market has fully priced in the expectation of a rate cut by the Fed in September, with traders also increasing the likelihood of a 50 basis point cut in September to over 50%.

![image.png](https://imageproxy.pbkrs.com/https://img.zhitongcaijing.com/image/20240813/1723555127891633.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg)

The PPI report also indicated a 0.2% decline in service costs, reflecting a decrease in profit margins for machinery and automobile wholesalers. Commodity prices rose by 0.6%, marking the largest increase since February, primarily driven by higher food and gasoline prices.

Excluding the smaller food, energy, and trade indicators favored by many economists, prices rose by 0.3%, the largest increase in three months. Compared to a year ago, this index rose by 3.3%.

Categories used in the PPI report to calculate the Federal Reserve's preferred inflation gauge - the Personal Consumption Expenditures Price Index (PCE) - showed a relatively mild overall trend.

Within these categories, doctor and nursing care costs and airfare declined, while hospital outpatient costs remained flat. Portfolio management service prices rose by 2.3%. The July PCE will be released later this month.

Costs of processed products for intermediate demand rose by 0.7% from the previous month, marking the largest increase since February, primarily driven by rising diesel costs.

The softness in final service demand reflects a reversal in profit margins in July after a significant increase in June. Excluding trade services, wholesale prices rose by 0.3%

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