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Investing.com - U.S. producer prices held steady on a monthly basis and grew at a slower annualized pace in June, restrained in part by a decline in travel accommodation services costs that helped offset climbing prices for final demand goods.
In the twelve months through June, the producer price index advanced 2.3%, after rising by 2.7% in May, Labor Department data showed on Wednesday. Month-on-month, the reading stood at 0.0%, slowing from a prior level of 0.3%.
Economists had projected a yearly rate of 2.5% and 0.2% on a monthly basis.
Prices for final demand goods rose by 0.3% month-over-month, the biggest increase since February, with analysts suggesting that the uptick could stem from elevated U.S. tariffs.
However, the rise in goods prices was counterbalanced by a 0.1% drop in final demand services costs. Much of the dip in services was linked to a 4.1% fall in traveler accommodation services prices, while the gauges of cars and car parts as well as airline passenger services also moved lower.
Futures connected to the main U.S. stock averages pointed higher after the PPI release.
The new report comes after data on Tuesday showed that U.S. consumer prices grew at a faster pace in June, indicating that the impact of President Donald Trump’s aggressive tariff policies may be starting to emerge.
Headline consumer price growth came in at 2.7% in the twelve months to June, compared with expectations of 2.6% and May’s reading of 2.4%. Month-on-month, the figure was 0.3%, up from 0.1% in May and in line with projections.
Excluding more volatile items like food and fuel, so-called "core" CPI also accelerated slightly to 2.9% year-on-year and 0.2% on a monthly basis. Yet both readings were below estimates of 3.0% and 0.3%, respectively.
The benchmark S&P 500 and blue-chip Dow Jones Industrial Average both fell on Tuesday following the data, erasing some early gains, as analysts noted a particular rise in the prices of goods like apparel and toys that are more exposed to the tariffs. This underpinned some expectations that the Federal Reserve will not be in a rush to cut interest rates in the near term.
In a note, analysts at Capital Economics said that, taken together, the PPI and CPI data point to the three-month annualized core personal consumption expenditures (PCE) price index edging back up to 2.3%. The PCE gauge is often used by the Fed to help determine the state of inflationary pressures.
"[W]hile a reversal of its recent downward trend, [this] is arguably better than could have been hoped for when President Trump first started threatening large reciprocal tariffs earlier this year," the analysts argued.
However, they flagged: "[W]ith firms’ pre-tariff inventory stockpiles likely running low and reciprocal tariffs set to rise markedly on August 1, we are not out of the woods yet."