U.S. producer prices remain unchanged in July

U.S. producer prices come in flat in July. PPI rose 3.3 percent year-on-year in the month, representing a pause in the recent streak of strong monthly rises in pipeline price pressures in the U.S. The July weakness was due to highly volatile components such as food, energy and trade. Stripping these producer prices rose 0.3 percent sequentially and 2.8 percent year-on-year.

Personal consumption PPI, the BLS series that tracks pipeline price pressures for CPI inflation, dropped 0.1 sequentially and increased 3 percent year-on-year. Stripping food & energy, personal consumption PPI dropped 0.1 sequentially and 2.3 year-on-year. This suggests some moderate downside risks to the expectations that July headline inflation is expected to have risen 0.1 percent sequentially and 2.9 percent year-on-year, noted Barclays in a research report.

The core inflation is likely to have risen 0.2 percent sequentially and 2.3 percent year-on-year. Despite today’s weak PPI print the annual rate of inflation for both PPI and CPI continues to be sound and is an indication that as the economy continues to expand and labor markets improve inflation pressures could firm further in the coming months, stated Barclays.

Overall goods prices were up 0.1 percent on a sequential basis, thanks to the non-food and energy components. Food PPI dropped 0.1 percent, while energy prices dropped 0.5 percent. Goods excluding food and energy rose 0.3 percent, widely in line with the recent trend. Services PPI dropped 0.1 percent mainly due to a sharp 0.8 percent fall in trade services. Elsewhere pipeline price pressures strengthened in the services sector. Transportation and warehousing costs were up 0.3 percent sequentially.

Transportation costs have been increasing strongly since the beginning of the second quarter and several business surveys have reported a shortage of truckers and new regulations as possible explanations, added Barclays.

At 17:00 GMT the FxWirePro's Hourly Strength Index of US Dollar was slightly bullish at 67.9117. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex