US producer prices show continued rebound in July

Producer prices rose 0.2% m/m in July (previous: 0.4%), in line with forecast and a touch higher than consensus expectations. The increase in the headline PPI was driven by services, which reported a 0.4% m/m in prices on the month (previous: 0.3%). Part of this increase was due to the volatile trade services component. This volatile series measures margins for retail and wholesale services and is notoriously difficult to forecast.

The increase in overall services prices drove the final demand ex food and energy version of core PPI to rise 0.3% m/m in July (forecast: 0.2% m/m; consensus: 0.1% m/m). Stripping out this volatile component reveals a healthy 0.2% on the month, however (previous: 0.3% m/m), consistent with a firming in core pricing pressures. The goods side of final demand PPI fell 0.1% m/m in July (previous: 0.7%), with food (-0.1% m/m, previous: 0.6%) and energy (-0.6% m/m, previous: 2.4%) both down on the month. Core final demand goods prices were flat.

The personal consumption PPI (Figure 1) rose 0.2% m/m on the month (previous: 0.5%) but the year-on-year rate fell to -0.4% (previous: -0.1%). Personal consumption goods fell 0.2% m/m (previous: 0.5%) and personal consumption services rose 0.4% m/m (previous: 0.2%). Personal consumption services PPI ex food, energy and trade services was up 0.3% m/m for the second month running.

"We take this latter series as a positive indication of pipeline price pressures for services. The July data bring the yearly rates of headline and core final demand PPI to -0.8% y/y and +0.6% y/y, respectively. On balance, we view the data as in line with our expectations and consistent with a firming in producer prices", says Barclays.