A gauge of U.S. business prices rose for the third straight
month in July, a sign inflation has stabilized following months of historically
weak readings. The producer-price index, which measures the prices companies
receive for goods and services, rose a seasonally adjusted 0.2% in
July after climbing 0.4% in June, the Labor Department said Friday. Core
prices, which strip out volatile energy and food components, were up 0.3% last
month.
Economists surveyed by The Wall Street Journal had forecast
overall and core producer prices would climb 0.1%. While stronger than
expected, the index suggests that inflation has steadied but isn’t
strengthening. Overall producer prices were down 0.8% in July from a year
earlier, while core prices were up only 0.6%.
Producer prices and other inflation gauges have broadly
declined over the past year due to cheaper oil, a stronger dollar and soft
global demand. Reinforcing those trends, China earlier this week devalued
its currency—making Chinese goods cheaper in the U.S.—and oil prices hit a
multiyear low in early trading Friday.
July’s latest inflation figures reflected a divide between
stronger prices for services and weaker prices for goods. In July, producer
prices for services rose 0.4% while goods declined 0.1%. Prices for energy and
food both fell.
A measure of consumer prices—the producer-price index for
personal consumption—rose 0.2% last month. But there is little inflation
pressure in the pipeline. The price index for processed goods for intermediate
demand, which tracks costs of products used as inputs for production, decreased
0.2% in July and was down 6.6% from a year earlier.
The Federal Reserve is looking for inflation to firm
gradually as it considers when to raise short-term interest rates, which have
been near zero since December 2008. Fed officials have indicated they could
start lifting rates as early as September if the economy continues to show
signs of steady growth. The central bank’s preferred inflation gauge, the price
index for personal consumption expenditures, has undershot a 2% target for
more than three years.
The producer-price index measures price changes from the
perspective of the seller, but generally tracks similar, closely watched
measures of inflation for consumers.
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