Biggest drop in US PPI in almost a year

US PRODUCER prices unexpectedly fell in July, recording their biggest drop in nearly a year and pointing to a further moderation in inflation that could delay a Federal Reserve interest rate increase. Other data yesterday showed an increase in the number of Americans filing for unemployment benefits last week. The trend in weekly jobless claims, however, remained consistent with a tightening labour market. The labour department said yesterday that its producer price index for final demand slipped 0.1 percent last month, weighed down by decreasing costs for services and energy products. That was the largest decline since August 2016 and reversed June’s 0.1 percent gain. In the 12 months to July the producer price index (PPI) increased 1.9 percent after rising 2 percent in the year to June. Economists had forecast the PPI ticking up 0.1 percent last month and climbing 2.2 percent from a year ago. Though the link between the PPI and the consumer price index has weakened, last month’s drop in producer prices could worry Fed officials who argue that the moderation in inflation was temporary. Fed chairperson Janet Yellen told lawmakers last month that “some special factors” were partly responsible for the low inflation readings. – Reuters