July Producer Prices

Producer prices in July, according to the Labor Department, fell .9%, a favorable comparison to June’s 1.8% jump, especially if you dwell within the camp fearing future inflation.  Since most of this month’s downside action is attributable to declines in food and energy prices (primarily heating oil, not gasoline), all eyes should turn to the core number, which excludes these two components.  It too was down, but barely, falling .1% after rising .5% the previous month.  Year-over-year, on a seasonally-adjusted basis, the headline PPI is down 6.4%, while the core remains in positive territory, up 2.6%.  But even the core number shows somewhat of a trend toward weakness as it measured plus 3.4% in June.  This month’s somewhat benign PPI data, generally interpreted as price pressures at the wholesale level, will likely turn back up to a degree if the current upward trend in oil prices maintains its present course.  Naturally this applies to the headline number.  The core reading will be jostled by our government’s “cash for clunkers” program; to what extent and in which direction remains to be seen, though here at Atlas Indicators we are assuming it will rise a bit as well.