U.S. Producer Prices Flat in June as Services Offset Goods Inflation
U.S. producer prices remained unchanged in June on a monthly basis and showed slower annual growth, partly due to a significant drop in travel accommodation costs, which offset rising prices for goods.
According to Labor Department data released Wednesday, the Producer Price Index (PPI) increased 2.3% year-on-year in June, down from May’s 2.7% gain. On a month-over-month basis, prices were flat, compared to a 0.3% rise in the previous month.
Economists had forecast a 2.5% annual increase and a 0.2% monthly rise.
Final demand goods prices rose 0.3% in June, marking the sharpest increase since February. Analysts suggest this may be linked to higher U.S. tariffs. However, this rise was offset by a 0.1% decline in service prices, led by a 4.1% drop in traveler accommodation services. Prices also fell for car-related services and airline tickets.
Following the release, futures tied to key U.S. stock indices pointed higher.
The PPI figures followed Tuesday’s consumer price data, which showed inflation picking up, possibly reflecting the early effects of President Donald Trump’s tariff actions.
Headline consumer inflation accelerated to 2.7% annually in June, slightly above expectations of 2.6% and up from 2.4% in May. Monthly CPI rose 0.3%, matching forecasts and rising from May’s 0.1%.
Core CPI, which excludes food and energy, ticked up to 2.9% year-over-year and 0.2% month-over-month—both slightly below projections of 3.0% and 0.3%, respectively.
Despite early gains, the S&P 500 and Dow Jones Industrial Average ended lower on Tuesday as markets reacted to tariff-sensitive categories like clothing and toys seeing noticeable price increases. This dynamic has dampened expectations for an imminent Federal Reserve rate cut.
In a note, Capital Economics analysts said the combined PPI and CPI data suggest that the three-month annualized core PCE price index—a key inflation metric for the Fed—may have edged up to 2.3%.
“Although this reverses a recent cooling trend, it’s arguably a better outcome than anticipated when Trump first began warning of sweeping tariffs earlier this year,” they wrote.
Still, they cautioned that with pre-tariff inventory reserves likely dwindling and more tariffs set to take effect on August 1, risks remain: “We’re not out of the woods yet.”
