US Producer Prices Stagnated on Decline in Services Costs

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(Bloomberg) — US wholesale inflation moderated in June as a sharp decline in the costs of travel-related services blunted a pickup in goods prices. 

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The producer price index was unchanged from a month earlier, after an upwardly revised 0.3% gain in May, according to a Bureau of Labor Statistics report released Wednesday. US wholesale prices rose 2.3% from a year earlier, the least since September. 

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Excluding food, energy and trade services, the PPI was also flat. It increased 2.5% from June of last year — the smallest annual advance since late 2023. 

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The PPI report follows June consumer price data that showed higher tariffs are filtering through into a variety of categories that include household furnishings, appliances and recreational goods. While inflation has been mild so far this year, many economists expect it to gradually build as more companies attempt to offset higher trade costs.

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The latest wholesale price data suggest manufacturers are so far proceeding cautiously on the extent to which they can pass through higher US tariffs to their customers. The data showed wholesaler and retailer margins were little changed in June after surging in May.

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Goods prices excluding food and energy rose 0.3%. Energy costs climbed as natural gas for electric power generation jumped the most in three years. 

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Services costs, however, fell 0.1%. Over half of the decline was due to a 4.1% drop in traveler accommodations services, the BLS said. Airline passenger services slid 2.7%, the biggest drop since May 2024.

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Inflation Forecasts

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Economists pay close attention to the PPI report because some of its components are used to calculate the Federal Reserve’s preferred measure of inflation: the personal consumption expenditures price index. Those categories, which include airfares, were mixed in June. 

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Portfolio management fees increased, reflecting higher stock prices. Health care-related categories were generally muted. The PCE report will be published later this month.

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Fed policymakers are widely expected to keep interest rates unchanged at their July meeting as they await more clarity on the impact from US trade policy. President Donald Trump’s frequent trade-policy adjustments, including recent announcements of higher tariffs on Mexico, Canada and copper, are making it difficult for companies to ascertain the cost impact on their operations.

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Like the CPI report, the PPI data also indicated some tariff-related inflation. Consumer durable goods costs rose 0.4% after a 0.5% gain in the prior month, the biggest back-to-back gain in about three years. 

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The PPI report showed the costs of processed goods for intermediate demand, which reflect prices earlier in the production pipeline, edged up. Unprocessed goods prices increased for the first time in four months.

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—With assistance from Mark Niquette.

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