US Producer Price Index Flat, Restraining Inflation Fears
$DIA, $SPY, $QQQ, $RUTX, $VXX
US wholesale prices were unchanged in July after 2 months of increases, indicating inflation pressures have softened a bit.
Thursday, the Labor Department said that the PPI (producer price index) which measures price changes before they reach the consumer increased 3.3% last month from a year earlier, down slightly from 3.4% in June, which was the biggest in 6 years.
Gasoline prices and other energy costs fell after 2 months of strong gainers, and food costs also declined.
With the economy growing at a healthy pace, inflation has perked up after nearly a decade of mostly tame prices. Higher gasoline prices have been the Key catalyst, but they have leveled off in recent weeks.
The average price nationwide for a gallon of gasoline was $2.87 Thursday, according to AAA, the same as last month.
The consumer price index increased 2.9% in June from a year earlier, also the largest in 6 years.
The Fed’s preferred inflation gauge has risen at a more muted pace, increasing 2.2% in the past year. The Fed targets 2% inflation to protect against deflation, a destabilizing trend that leads to lower prices and incomes. Price increases were below 2% for years, according to the Fed’s gauge.
The Fed is raising the short-term interest rate it controls in an effort to keep inflation in check. Fed policymakers have increased the rate 5X in the past 3 years, to between 1.75 and 2%. They have indicated they will hike 2X more this year.
A drop in wholesale service prices, including airline fares and hospital care, offset a slight increase in wholesale goods costs to leave producer prices unchanged in July. That followed gains of 0.3% in June and 0.5% in May.
Good & Services
Goods prices rose 4.5% in July from a year earlier, the strongest gain in 6.5 years, led by higher costs for new cars and pharmaceuticals. Services costs have increased 2.6% in the past year.
Investors will receive both the Consumer Price Index (CPI) for July and the July Treasury Budget Friday.
Thursday, the major US stock market indexes finished at: DJIA -74.52 at 25509.23, NAS Comp +3.46 at 7891.79, S&P 500-4.12 at 2853.32
Volume: Trade on the NYSE came in at 651-M/shares exchanged
- NAS Comp +14.3% YTD
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- DJIA +3.2% YTD
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