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U.S. Producer Prices Fall Unexpectedly

  • U.S. producer prices unexpectedly fell in June as weakness in services offset rising costs for energy goods
  • Deflation remains unlikely as the economy battles depressed demand caused by the COVID-19 pandemic
  • Lower interest rates likely to continue

Producer prices unexpectedly fell in June, upsetting economic forecasts as weakness in services offset rising costs for energy goods.

The producer price index was down 0.2 percent in June and 0.8 percent compared to June 2019. The PPI was expected to grow 0.4 percent from May and 0.2 percent annually. The “core” PPI, which excludes more volatile components, was up 0.3 percent (the largest gain since January) but down 0.1 percent from June 2019.

This situation is likely to lead to lower interest rates and slower inflation. Deflation is unlikely due to depressed demand caused by the COVID-19 pandemic, which has also caused disruption of supply chains, a downward trend in price, and overall volatility.

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