Producer Prices: Modest Easing; Sub-3 in 2023?

Bottom Line:  Producer prices fell in July, led by lower energy prices. But core prices rose less than expected too. The biggest driver of increases at the core level remained margins in the trade services sectors. Outside of that, though, services saw lower prices. Investment management services were one of the larger decliners as fee-based managers earned fees on lower asset bases with stock and bond markets lower. Overall, this report suggests goods prices should continue to ease, barring another sharp increase in energy prices. And the trends on the services side of the economy (outside of trade/transportation, which tends to correlate with goods prices) is largely to the downside with year-on-year readings already near 2%. That suggests we could easily be seeing sub-4 % year-on-year producer prices by early next year and possibly even sub-3% by the middle of next year.

The PPI FELL by 0.5% in July, compared with market expectations for an increase of 0.8%. Overall producer prices are 9.7% ABOVE the year-ago level.

The Goods PPI FELL by 1.8% in July but is now 14.7% ABOVE its year-ago level. Food prices rose by 1.0% and are now 15.0% ABOVE their year-ago level.  Meanwhile energy prices fell by 9.0%. but are now 36.7% ABOVE their year-ago level. The Goods PPI less food and energy  ROSE by 0.2%,  and is now 8.5% ABOVE its year-ago level.
 
The Services PPI ROSE by 0.1% in July and is now 6.8% ABOVE its year-ago level.The Core PPI ROSE by 0.2%, compared with market expectations for an increase of 0.5%.  Core producer prices are now 7.5% ABOVE their year-ago level.