U.S. producer prices rise sequentially in June, slightly stronger than expectations

U.S. producer prices rose slightly stronger than consensus expectations in June. PPI rose 0.1 percent sequentially, as compared with consensus expectations of 0 percent. Stripping food, energy and trade, the producer prices inflation came in little stronger, rising 0.2 percent sequentially. Prices of goods and services rose modestly by 0.1 percent and 0.2 percent, respectively. Markedly, a solid monthly rise in food was countered by a drop in energy, within the goods category.

On a year-on-year basis, producer price inflation has decelerated in the past few months, after accelerating steadily since the middle of 2016. Headline PPI rose 2 percent year-on-year from May’s 2.4 percent. Stripping energy, food and trade, PPI decelerated to 2 percent from 2.1 percent.

Excluding food energy and trade services, core PPI personal consumption inflation rose 0.2 percent sequentially and 2 percent year-on-year, a less volatile measure. Producer price pressures is still strong at this point, although the reversal of the recent upward momentum in PPI is dismaying, particularly because the slowdown appears synchronized with similar moves in the import and consumer price indices, noted Barclays in a research report.

Inflation pressures are expected to stay strong, as labor markets continue to tighten and the dollar and commodity prices are widely stable, although the weakness in recent months presents some downside risks the view, stated Barclays.

“We expect core CPI to rise 0.2 percent m/m and 1.7 percent y/y and headline CPI to be unchanged on the month and up 1.7 percent y/y”, added Barclays.

At 16:00 GMT the FxWirePro's Hourly Strength Index US Dollar was neutral at -13.9434. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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