Senior economics reporter
Price pressures for intermediate goods have not translated into higher prices for consumers.
The numbers: The producer price index was flat in July, the Labor Department reported Thursday. That was below the MarketWatch forecast of a 0.2% gain.
Another measure preferred by economists, known as core PPI, rose 0.3% for the second straight month. The core rate strips out food, energy and trade margins.
The flat PPI reading pulled the 12-month rate of wholesale inflation down to 3.3%. The 12-month rate of core PPI advanced 2.8% in July, just below the record high of 2.9% reached in March.
What happened: Wholesale prices were held down by lower prices for food, energy and trade. The electrical power index fell 1.6% and meat prices also fell. The index for pharmaceutical preparations rose 0.7%. The index for final demand for services fell 0.1%, the first decline since December.
The big picture: On second-quarter earnings calls, many industrial firms have made note of rising input costs. Economists are watching to see if these price gains translate into faster level of retail inflation. The government will release the consumer price index for July on Friday. Richmond Fed President Tom Barkin said Wednesday that firms are reluctant to pass higher intermediate goods prices to consumers.
What they’re saying: “Both the headline and core indexes were constrained by a 0.8% drop in the volatile ‘trade services’ component, which measures profit margins for retailers and wholesalers. This is a correction, following a run of big increases; it likely does not mark the start of a sustained run of smaller core PPI numbers,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics.
Market reaction: Not much. Stocks DJIA, -0.18% were set to open higher Thursday on strong earnings reports. The yield on the 2-year Treasury TMUBMUSD02Y, -0.46% , which is very sensitive to Federal Reserve rate expectations, edged lower to 2.66%.