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Strong services drive US producer prices higher in July

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LA Post: Strong services drive US producer prices higher in July
By Lucia Mutikani
August 11, 2023


By Lucia Mutikani

WASHINGTON (Reuters) -U.S. producer prices increased slightly more than expected in July as the cost of services rebounded at the fastest pace in nearly a year, but the trend remained consistent with a moderation in inflationary pressures.

The producer price index for final demand rose 0.3% last month, the Labor Department said on Friday. Data for June was revised lower to show the PPI unchanged instead of nudging up by the previously reported 0.1%.

In the 12 months through July, the PPI increased 0.8% after gaining 0.2% in June, boosted by a lower base of comparison last year. Economists polled by Reuters had forecast the PPI would climb 0.2% on the month and advance 0.7% on a year-on-year basis.

The government reported on Thursday that consumer prices rose moderately in July, strengthening expectations that the Federal Reserve would likely keep interest rates unchanged next month. Since March 2022, the U.S. central bank has raised its benchmark overnight interest rate by 525 basis points to the current 5.25%-5.50% range.

The cost of wholesale services jumped 0.5% last month, the largest increase since last August, after dipping 0.1% in June.

A 7.6% surge in portfolio management fees accounted for 40% of the rise in services. There were also increases in the costs of machinery and vehicle wholesaling, outpatient care, chemicals and allied products wholesaling as well as securities brokerage, dealing investment advice and related services.

Airline fares also increased, but margins for food and alcohol retailing fell 2.5%. The cost of freight and cargo transportation also declined.

Goods prices ticked up 0.1% last month after being unchanged in June. A 0.5% rebound in the cost of food was largely offset by energy prices, which were unchanged.

Excluding the volatile food and energy components, the so-called core goods prices were unchanged last month after falling 0.2% in June.

The narrower measure of PPI, which strips out food, energy and trade services components, rose 0.2% after inching up 0.1% in June. In the 12 months through July, the so-called core PPI increased 2.7%, matching June's rise.

(Reporting by Lucia Mutikani; Editing by Paul Simao and Andrea Ricci)

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