Businesses’ costs aren’t rising as fast as they have been in recent months, an indication that price hikes could slow for consumers in the months ahead. <\/p>\n
The Producer Price Index, which tracks prices changes for producers and manufacturers, increased 4.7% in the 12 months that ended in July. That was a slowdown from 5.5% in June, according to Bureau of Labor Statistics data released Thursday. <\/p>\n
On a monthly basis, prices were unchanged after falling 0.1% in June. Both measures were better than economists expected. <\/p>\n
The PPI, a closely watched measure of wholesale inflation, serves as a potential bellwether for what consumers could experience in the near future; however, the higher prices businesses pay each other aren’t always fully passed on through the supply chain. <\/p>\n
Wholesale inflation is cooling off after the war in Iran caused a spike in oil and gas prices and other commodities. Producer-level inflation climbed to a four-year high of 5.9% in May before falling energy prices cooled things off a bit in June and July. <\/p>\n
Wholesale food prices also declined for the second month in a row. <\/p>\n
But since oil and gas prices can vary widely on a monthly basis and are subject to more on-time shocks \u2013 especially in the wake of a war \u2013 economists closely watch “core” inflation gauges that remove volatile components. Core PPI, which excludes food and energy prices, rose 0.2% in July and slowed to 4.2%, the lowest rate in four months. <\/p>\n
On Wednesday, the July Consumer Price Index showed that inflation of commonly purchased goods and services cooled for the second month in a row to an annual rate of 3.4%<\/a>. <\/p>\n Prices are still rising much faster than they typically do, however. That’s been the case for more than five years now, and that’s had a compounding, negative effect on household finances and affordability. <\/p>\n The latest PPI report may portend slower inflation to end the summer, but fuel prices remain a wild card because of the ongoing Iran conflict, noted Ben Ayers, senior economist for Nationwide <\/p>\n And while Thursday’s report paints a picture of a broader easing of wholesale inflation, it also highlights some more localized pressures resulting from the massive AI build-out and investment<\/a>. <\/p>\n The trillions of dollars being poured into AI-related components means storage and memory suppliers are prioritizing making the high-performance memory chips commanded by data centers. That’s diverted some of the production away from consumer products and raised costs for manufacturers. <\/p>\n Semiconductor and other electronic component manufacturing prices, for example, are up 27.1% annually from a year ago, easing from the 27.7% annual rate notched in June. <\/p>\n