Wholesale prices dip in July – first drop in more than 2 years

Prices at the wholesale level fell from June to July, the first month-to-month drop in more than two years and a sign that some of the U.S. economy’s inflationary pressures cooled last month.

Thursday’s report from the Labor Department showed that the producer price index — which measures inflation before it reaches consumers — declined 0.5% in July. It was the first monthly drop since April 2020 and was down from a sharp 1% increase from May to June.

The easing of wholesale inflation suggests that consumers could get some relief from relentless inflation in the coming months. The wholesale report follows government data Wednesday that showed that consumer inflation was unchanged from June to July — the first flat figure after 25 straight months of increases.

Inflation flat in July – but concerns about rising prices still linger

Yet economists caution that it’s still too early to say that inflation is headed steadily lower.

“The July deceleration … is a move in the right direction,” said Rubeela Farooqi, chief U.S. economist at High Frequency Economics. “But producer costs continue to rise at a rapid pace, well above target.”

Wholesale food prices rose 1% from June to July, a sign that grocery prices will likely keep rising in the coming months. The wholesale costs of eggs, beef and vegetables all jumped.

Trucking freight costs, though, fell 0.3%, evidence that some supply chain snarls are easing.

Inflation at the wholesale level still jumped 9.8% in July compared with a year earlier, suggesting that inflation will remain at painful levels for months to come. That was down from a year-over-year surge of 11.3% in June — near a four-decade high — and was the smallest annual rise in eight months.

Thursday’s report showed that wholesale gas prices tumbled 16.7% from June to July.