Wholesale Inflation Cools as Gas, Food Prices Fall
The producer price index rose 4.7% in July from a year earlier, down sharply from June, as falling gas and food costs eased pressure on prices before they reach consumers.
Wholesale inflation slowed last month as gas prices retreated from their spike tied to the Iran war and other costs cooled, offering a sign that consumer inflation could ease further in the months ahead.
The Labor Department's producer price index, which measures inflation before it reaches consumers, rose 4.7% in July compared with a year earlier, down from a 5.5% increase in June. On a monthly basis, wholesale prices were unchanged from June to July, after ticking down 0.1% the previous month.
The report follows Wednesday's consumer price inflation data, which also showed modest cooling last month. Still, consumer prices have risen faster than wages for four straight months, a gap that has made it harder for many Americans to afford necessities such as rent and utilities. If prices keep outpacing wages, consumers may be forced to pull back on spending in the coming months.
Excluding volatile food and energy categories, core wholesale inflation fell to 4.2% in July from a year earlier, down from 4.7% in June. On a monthly basis, core prices rose 0.2%, down from a 0.4% increase from May to June.
Gas prices fell in early July but then rose later in the month and into early August, raising the possibility that inflation could tick back up when August figures are released next month.
Still, last month's cooling gives Federal Reserve officials more room to avoid raising interest rates when they meet in September. Fed officials are weighing whether to raise their key rate to combat inflation or hold it steady in hopes that price growth keeps easing on its own.
Wholesale prices often offer an early signal of where consumer inflation is headed. Economists also watch the data closely because some components, including health care and financial services, feed into the Fed's preferred inflation gauge, the personal consumption expenditures index, due out later this month.
Last week's report that employers actually cut jobs in July added to signs of economic weakness that could discourage the central bank from raising borrowing costs.
This article was produced with the assistance of artificial intelligence (AI), in accordance with our editorial policy.
