U.S. Producer Price Growth Far Exceeds Estimates In July

(RTTNews) - Producer prices in the U.S. increased by much more than expected in the month of July, the Labor Department revealed in a report released on Thursday.

The Labor Department said its producer price index for final demand shot up by 0.9 percent in July after coming in unchanged in June. Economists had expected producer prices to rise by 0.2 percent.

"The large spike in the Producer Price Index (PPI) this morning shows inflation is coursing through the economy, even if it hasn't been felt by consumers yet," said Chris Zaccarelli, Chief Investment Officer for Northlight Asset Management.

He added, "Given how benign the CPI numbers were on Tuesday, this is a most unwelcome surprise to the upside and is likely to unwind some of the optimism of a 'guaranteed' rate cut next month."

The report also showed a substantial acceleration by the annual rate of producer price growth, which surged to 3.3 percent in July from an upwardly revised 2.4 percent in June.

Economists had expected the annual rate of producer price growth to rise to 2.5 percent from the 2.3 percent originally reported for the previous month.

The much bigger than expected monthly increase by producer prices came as prices for services jumped by 1.1 percent in July after edging down by 0.1 percent in June.

Prices for trade services shot up by 2.0 percent, while prices for transportation and warehousing services climbed by 1.0 percent and prices for other services rose by 0.7 percent.

The Labor Department said prices for goods also increased by 0.7 percent in July after rising by 0.3 percent in June.

Food prices led the way higher, surging by 1.4 percent in July after inching up by 0.1 percent in June, while energy prices advanced by 0.9 percent for the second straight month.

The report also said core producer prices, which exclude prices for food, energy and trade services, climbed by 0.6 percent in July after coming in unchanged in June.

The annual rate of growth by core producer prices accelerated to 2.8 percent in July from 2.5 percent in June.

On Tuesday, the Labor Department released a separate report showing consumer prices in the U.S. increased in line with economist estimates in the month of July.

The Labor Department said its consumer price index rose by 0.2 percent in July after climbing by 0.3 percent in June. The modest increase matched expectations.

The annual rate of growth by consumer prices in July was unchanged from the previous month at 2.7 percent, while economists had expected the pace of growth to tick up to 2.8 percent.

The report also said the core consumer price index, which excludes food and energy prices, climbed by 0.3 percent in July after rising by 0.2 percent in June. The increase by core prices was also in line with estimates.

Meanwhile, the annual rate of growth by core consumer prices accelerated to 3.1 percent in July from 2.9 percent in June. Economists had expected the pace of growth to inch up to 3.0 percent.