U.S. PPI comes in below forecasts with a drop to 2.3%

The PPI in the U.S. rose 2.3% year-over-year in June, falling short of Wall Street’s 2.7% figure from the month before and sliding under expectations.

That’s a soft print for wholesale prices, especially when economists had penciled in a monthly gain of 0.2%. Instead, the index just sat there flat, according to the Bureau of Labor Statistics (BLS).

Same story for core PPI, which strips out food and energy. Also expected to rise by 0.2%, but it didn’t move either. Not up, not down. Zero. This adds another layer to the inflation puzzle, especially right after the consumer price index (CPI) data hit on Tuesday.

PPI update: Goods prices rise while services fall

Even though the top-line PPI stayed flat, not every category was still. Final demand goods rose 0.3%, mainly thanks to communication equipment, which are most sensitive to trade restrictions and tariffs, surging 0.8%. But that gain got canceled out by a 0.1% drop in services, and snd services make up a big chunk of the U.S. economy.

At the same time, May’s original PPI print got a facelift. The BLS revised it upward, from 0.1% to 0.3%. That might sound small, but it’s actually the biggest jump in wholesale goods prices since February. Within the core goods section again, this means excluding food and energy, there was another 0.3% increase. So even if the headline number didn’t move in June, certain parts of the economy clearly did.

Zooming out a bit, on a 12-month basis, we see the headline PPI came in at 2.3%, down from 2.7% in May. That’s still above the Federal Reserve’s 2% target, but it’s easing. Compare that with the CPI data from Tuesday, where consumer prices rose 0.3% month-over-month, and the annual headline inflation rate landed at 2.7%. Core CPI, which cuts out the noise from food and energy, hit 2.9% year-over-year—its highest level since February.

Trump demands rate cut while markets shrug

Right after the CPI report dropped, Trump once again demanded that the Federal Reserve lower interest rates. He wants borrowing costs down. He thinks that’ll help businesses and households. But the market isn’t buying it. And the data is actively proving him wrong.

Traders have since priced in zero chance of a cut in July. Even for September, odds are falling. The Fed hasn’t moved. Officials are still playing it cautious. They’ve said they want to wait and see what the full impact of tariffs will be before pulling the trigger on rates. They believe the U.S. economy is strong enough to handle the pressure… for now.

Back to the PPI: energy prices saw a 0.6% jump in June, and food went up too, but just by 0.2%. One category that really stood out was chicken eggs, which down by 21.8% in a single month.

While the U.S. is dealing with mixed inflation data, the U.K. is facing the opposite problem. According to the Office for National Statistics (ONS), U.K. inflation spiked to 3.6% in June, hotter than the 3.4% expected. That makes it two months in a row sitting above forecast. Core inflation across the pond hit 3.7%, also above the previous 3.5% reading from May.

The bigger picture here is about expectations. When you expect something terrible and that’s exactly what you get, it’s not exactly a win. Yes, CPI and PPI numbers came in either flat or just slightly below forecast, but they’re still high enough to stress markets. According to Matthew Ryan, head of market strategy at Ebury, “The latest U.S. inflation report practically confirmed that President Trump’s tariffs acted to push up consumer prices in June.”

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