U.S. July PPI data growth lower than expected, highlighting continued slowdown in inflation pressure.
Data released on Tuesday showed that the PPI index representing final demand rose by 0.1% from the previous month. The median forecast from economists surveyed by institutions was for a growth of 0.2%. Furthermore, compared to a year ago, PPI has risen by 2.2%. Excluding the volatile food and energy categories, July's core PPI was 2.4%, unchanged from the previous month, marking the mildest reading in four months.
After the data was released, gold briefly rose by $6, but quickly gave back all gains.
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The more closely watched CPI data will be released on Wednesday, with an expected month-on-month growth rate of 0.2% for July CPI, and a month-on-month growth rate of 0.2% for core CPI.
The PPI report showed that service costs decreased by 0.2%, reflecting a decline in profit margins for machinery and auto wholesalers. Commodity prices rose by 0.6%, the largest increase since February, with rising gasoline prices being a major factor.
Categories used to calculate the Fed's preferred inflation gauge, the PCE price index, were generally mild in the PPI report. In these categories, doctor and nursing fees and airfare costs declined, while hospital outpatient fees remained flat. Portfolio management service prices rose by 2.3%. July PCE price index will be released later this month.
Currently, with inflation pressures easing and July's unemployment rate soaring to a near three-year high of 4.3%, the market is increasingly concerned about a weak labor market, the risk of the Fed falling behind the curve, and is starting to price in the Fed starting rate cuts in September, possibly even a 50 basis point cut.

Another proof of slowing inflation? US July PPI increase lower than expected!

- The July Producer Price Index (PPI) in the U.S. showed a lower-than-expected increase, indicating a continued slowdown in inflation pressure. The PPI index representing final demand rose by 0.1% compared to the previous month, below the economists' median forecast of 0.2%. Additionally, the year-on-year PPI increase stood at 2.2%, with the core PPI for July, excluding volatile food and energy categories, remaining steady at 2.4%, the most moderate reading in four months.
- Following the data release, gold briefly rose by $6 but quickly retraced all gains. Attention now shifts to the upcoming Consumer Price Index (CPI) data, with expectations of a faster month-on-month growth of 0.2% for both overall and core CPI in July. The PPI report highlighted a 0.2% decline in service costs, reflecting reduced profit margins for machinery and auto wholesalers, while a 0.6% increase in commodity prices, driven mainly by rising gasoline prices, marked the largest surge since February.
- Notably, categories used to calculate the Federal Reserve's preferred inflation gauge, the PCE Price Index, showed overall mild changes. Among these categories, doctor and nursing fees decreased, while hospital outpatient costs remained stable. Investment management service prices rose by 2.3%. With inflation pressures easing and the July unemployment rate spiking to a nearly three-year high of 4.3%, concerns are mounting in the market over a weakened labor market. Speculations arise about the Fed potentially cutting rates starting in September, with a chance of a 50 basis point cut.