Wholesale costs flat in July in latest positive sign for inflation

Wholesale costs for goods and services were flat in July, the Bureau of Labor Statistics reported Thursday in the latest positive sign for inflation.

The producer price index, a measure of underlying inflation pressures, was unchanged for the month, below the 0.2% Dow Jones consensus estimate and after falling 0.1% in June. The June figure was revised from a previously reported decline of 0.3%.

Excluding food and energy, the core PPI rose 0.2%, against the forecast for a 0.3% gain. The core PPI excluding trade services increased 0.4%.

On an annual basis, the headline PPI increased 4.7% for the all-items index and 4.2% for core, according to unadjusted figures.

The report follows several other indicators telling a similar story – that after a ramp-up in inflation earlier this year fueled by the Iran war and President Donald Trump's tariffs, the rate of price increases is beginning to ease.

Stock market futures were positive after the report while Treasury yields were lower. Traders further reduced the odds for a September rate hike from the Federal Reserve.

"Net, net, pipeline pressures at the lower stages of production are not adding to the inflation risks the consumer faces," said Chris Rupkey, chief economist at Fwdbonds. "It counts as good news that for a second consecutive month, PPI final demand prices have not gone up adding to the cost of living crisis faced by Americans."

Services prices rose 0.2% for the month, pushed by a 6.5% surge in portfolio management, a category that can show outsized gains in the first month of the quarter due to reporting requirements.

Goods prices fell 0.7%, helped by a 3.1% decrease in energy, including a 5.7% slide in the gasoline index. Food prices fell 0.9% though core goods prices rose 0.1%.

Federal Reserve officials have been weighing the various inputs to the price picture as several key officials have been pushing for interest rate hikes to get inflation back to the central bank's 2% target.

On Wednesday, the BLS reported that the consumer price index rose just 0.1% in July as falling energy prices during the month helped lower price pressures. However, the headline annual inflation rate of 3.4% was still well above the Fed's goal.

Core consumer inflation was considerably tamer, posting a 0.2% monthly gain and 2.5% annual rate that put the level back to where it was prior to the start of the war.

Market expectations have switched in recent days, with traders now pricing in a rate hike in October or December after putting heavy odds that the Federal Open Market Committee would move at its next meeting on Sept. 15-16.

In other economic news Thursday, initial jobless claims rose to a seasonally adjusted 209,000 for the week ended Aug. 8, up 9,000 from the prior period and above the 204,000 estimate.