Producer prices in the United States cooled more than economists expected in July, giving the Federal Reserve more room to leave interest rates unchanged next month. A separate report showed jobless claims edging higher, but the increase has not yet spread into a broader deterioration in the labor market.
Producer-price inflation slowed sharply in July, reinforcing the case for the Fed to hold rates steady at its September meeting. Softer goods prices did most of the work, though one measure the Fed watches closely still accelerated.
PPI cools across the board
The Producer Price Index rose 0.0% month-over-month in July, an improvement from a revised -0.1% and below the 0.2% consensus forecast. The annual rate slowed from 5.5% to 4.7%, undershooting the 4.9% estimate economists had penciled in.
Energy prices dropped 3.1% month-over-month and food fell 0.9%, pulling the broader goods category down 0.7%. Services costs rose 0.2%, while construction prices jumped 2.2%.
Not every signal pointed the same way. PPI excluding food, energy and trade services accelerated from 0.1% to 0.4% month-over-month, even as its annual rate eased to 4.7%. As a result, the report supports a Fed hold in September, though ActionForex cautioned that August's PPI print will matter more, given a recent rebound in oil prices.
Jobless claims tick up, but not alarmingly
Initial jobless claims rose to 209,000 in the week ending August 8, up from a revised 200,000 and above the 202,000 consensus. Yet the four-week moving average held steady at 199,000, suggesting the uptick has not become a trend.
Continuing claims moved the other way. Insured unemployment fell to 1.777 million from a revised 1.799 million, while the insured unemployment rate held at 1.2%. ActionForex called the overall report mixed rather than decisively weak, with new claims rising even as continuing claims and their trend improved.
Sources: ActionForex, ActionForex
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