Producer Prices: Disinflation But Details Worth Watching

Bottom Line:  Producer prices rose even less than expected again in June as pipeline inflation on the goods side of the economy continues to decelerate sharply. At the headline level, producer prices have seen deflation in the last three- and six months. Excluding food and energy, core prices rose just over 1.3% annualized in the last three- and six months. Disinflation appears to be bottoming at very low levels in the goods sector. Producer prices in the services sector remain tame, but there has been a slight uptrend in services outside of transportation and warehousing services that bear close watching. Overall, producer prices continue to show disinflationary trends that will likely garner headlines. However, there is a modest reacceleration in pipeline inflation for services sectors that will likely support overall producer prices over the remainder of the year.