- Prior was 6.5%
- PPI final demand m/m -0.3% vs 0.1% expected (prior was +1.1%)
Core readings:
- PPI ex food and energy y/y 4.7% vs 5.2% expected
- Ex food and energy m/m +0.2% vs +0.4% expected
- Ex food energy, and trade +5.1% vs 5.1% prior
This isn’t a huge surprise given the downside miss in CPI yesterday but it underscores it and certainly validates it.
Details:
- Final demand energy: -6.4%
- Gasoline: -12.0%
- Final demand services: +0.2%
- Final demand foods: -0.6%
More:
- Processed goods for intermediate demand: -1.2% m/m, but +11.1% y/y
- Unprocessed goods: -4.1% m/m, +13.0% y/y
- Steel mill products: +3.6% m/m, +16.9% y/y
- Electronic components: +27.6% y/y
- Aluminum mill shapes: +52.4% y/y
- Diesel: -18.0% m/m (still +65.8% y/y)
The electronic components one is highly notable because it speaks to the AI boom and prices of memory and GPUs. That’s flowing into consumer goods, including at Apple where the company announced a series of substantial price increases.
On the surface, this is the producer-side mirror of yesterday’s CPI: the war premium coming out of energy, fast. Gasoline fell 12% at the wholesale level versus 9.7% at retail, diesel dropped 18%, jet fuel 17.2%, and crude petroleum in the unprocessed index fell 12.1%. Headline PPI going negative for the first time since the Hormuz spike is good news.
But read past the headline and the two reports tell different stories, and that’s where it gets interesting for anyone handicapping the inflation path into 2027.
CPI told us consumer inflation is cooling but the PPI side is still running 5.5% y/y against CPI’s 3.5%, and the ex-food/energy/trade measure at 5.1% hasn’t budged. Go deeper into the pipeline and it’s hotter still: processed intermediate goods up 11.1% over the year, unprocessed up 13%, and stage 1 — the rawest inputs — up 11%. That’s a big wedge between what producers are paying and what consumers are being charged and in a solid economy it can be passed on rather than eaten in margins.
The composition of the pipeline heat is familiar: metals and electronics. Steel mill products +3.6% in June alone despite the broad goods decline, aluminum mill shapes +52% y/y, primary nonferrous +66%, and electronic components +27.6% y/y — the same AI-and-tariff cocktail that’s been percolating. Data processing services rose 1.1% on the month too, adding to the AI boom part of the equation.
So the energy shock is unwinding (though maybe not for long).
One more note for the PCE watchers: the June components that feed straight into the Fed’s preferred gauge were mixed — airline passenger services -0.4%, portfolio management +0.5% and securities brokerage +3.1% (equity-market beta doing its thing), hospital inpatient care +0.4%, health insurance +0.3%. Nothing there screams a hot core PCE print, but the financial services strength will keep it from matching core CPI’s flat reading.
This article was written by Adam Button at investinglive.com.
