Wholesale prices were flat in July, below 0.2% rise forecasts

• Annual PPI increased 4.7% for all items and 4.2% for core, while goods prices fell 0.7% due to a 3.1% decrease in energy costs including a 5.7% drop in gasoline
• Stock futures rose and Treasury yields fell following the report, with traders lowering odds of a September rate hike and now pricing in October or December action
• The report follows similar CPI data showing consumer prices rose only 0.1% in July, with core annual inflation at 2.5%, back to pre-war levels

Summary: Wholesale Prices Flat in July, Signaling Easing Inflation

Key Data Points:

• The Producer Price Index (PPI) remained flat in July (0.0%), missing expectations of a 0.2% increase
• Core PPI (excluding food and energy) rose 0.2%, below the 0.3% forecast
• Annual headline PPI increased 4.7%; core PPI up 4.2%
• June PPI was revised to -0.1% from -0.3%

Breakdown:

• Services prices rose 0.2%, driven by a 6.5% surge in portfolio management
• Goods prices fell 0.7%, aided by a 3.1% energy decline and 5.7% drop in gasoline
• Food prices decreased 0.9%

Market Context:

The report adds to mounting evidence that inflation is moderating after earlier 2025 increases attributed to the Iran war and tariffs. The previous day's Consumer Price Index showed only 0.1% monthly growth, with annual inflation at 3.4%—still above the Federal Reserve's 2% target.

Market Reaction:

• Stock futures turned positive following the release
• Treasury yields declined
• Rate hike expectations shifted: traders reduced odds of a September Fed rate increase, now pricing in October or December action instead of the previously anticipated September 15-16 meeting

Additional Data:

Initial jobless claims rose to 209,000 for the week ending August 8, up 9,000 from the prior week and above the 204,000 estimate.

Analysis:

Economists view the data positively, indicating that wholesale price pressures aren't intensifying consumer inflation risks. The moderation provides the Federal Reserve more flexibility in timing monetary policy adjustments.