Wholesale Prices in the US Rise in July, Showing Some Relief from Inflationary Pressures
Inflationary pressures in the US seem to be slightly easing, as wholesale prices rose in July, according to the latest figures released by the Labor Department. The producer price index, which measures inflation before it reaches consumers, increased by 0.8% from July 2022. This follows a 0.2% year-over-year increase in June, which was the smallest rise since August 2020.
On a month-to-month basis, wholesale prices saw a 0.3% increase from June to July, marking the largest rise since January. This increase was primarily driven by higher prices in the services sector, particularly in investment portfolio management. Wholesale meat prices also experienced a sharp rise, contributing to the overall increase in wholesale inflation.
Despite the recent uptick in wholesale prices, analysts believe that the overall trend is still towards easing inflation. Wholesale inflation has been steadily declining since peaking at 11.7% in March 2022. Additionally, when excluding volatile food and energy prices, core wholesale inflation rose 2.4% from July 2022, the same increase as June. Core producer prices also increased by 0.3% from June to July, following a 0.1% decrease from May to June.
The figures released by the Labor Department reflect prices charged by manufacturers, farmers, and wholesalers and can provide insight into future trends in consumer inflation. The recent data suggests that inflation has been cooling over the past year, gradually approaching the Federal Reserve’s target level of 2%.
The combination of moderating price increases and a strong job market has raised hopes of a “soft landing” for the economy, wherein inflation is tamed without causing a recession. Rubeela Farooqi, chief U.S. economist at High Frequency Economics, notes that while producer prices were slightly above expectations, they are still below headline prices and moving towards the 2% target.
Many economists and market analysts believe that the recent rate hike in July could potentially be the last by the Federal Reserve. The Fed will review additional economic reports, such as consumer prices and their favored inflation gauge, as well as the August jobs report, before making any decisions on further rate hikes in September.
Inflation surged in 2021 due to a strong rebound from the pandemic recession, causing consumer prices to increase by 9.1% from the previous year. Supply chain disruptions were a major factor in the price increases; however, they have eased over the past year, reducing upward pressure on goods prices. In fact, the prices of durable goods even decreased in June.
Overall, the recent data indicates a slight easing of inflationary pressures, providing some optimism for a more stable economic environment moving forward.
