US PPI comes in softer than expected, confirms easing inflation pressures

• US producer prices remain unchanged in July, below the 0.2% increase expected by markets.
• Annual producer inflation slows sharply to 4.7% from 5.5% in June, also undershooting forecasts.
• The data reinforce signs of easing US inflation pressures after Wednesday’s softer consumer inflation figures.

Producer inflation in the United States (US) cools more than expected in July, adding to evidence that inflationary pressures are gradually easing after Wednesday's Consumer Price Index (CPI) data.

The US Producer Price Index (PPI) came unchanged on a monthly basis in July, following a revised 0.1% decline in June. Markets had expected producer prices to increase by 0.2%.

On an annual basis, the PPI rose 4.7% in July, slowing markedly from 5.5% in June and coming below the 4.9% increase expected by economists.

Underlying inflation pressures also moderate. The Core PPI, which excludes more volatile components, increases 0.2% MoM in July, down from a revised 0.4% in June and below the 0.3% market consensus. On a yearly basis, the Core PPI slowed to 4.2% from 4.7%, matching expectations.

Overall, the weaker-than-expected producer inflation report reinforces the disinflationary signal delivered by Wednesday's CPI figures. The combination of softer consumer and producer price pressures could strengthen expectations that inflation in the US is moving in a direction more favorable to near-term monetary policy holds by the Federal Reserve (Fed).

Market reaction

The US Dollar Index (DXY), which tracks the value of the US Dollar (USD) against a basket of six major currencies, remains under pressure following the release, losing 0.04% on Thursday and trading around 99.93 at the time of writing.