Wholesale inflation stalled out in July, handing the Federal Reserve a second straight piece of evidence that the price pressures which built through the spring are losing momentum.
The Producer Price Index for final demand was unchanged last month, the Bureau of Labor Statistics reported Thursday, below the 0.2% increase economists had penciled in. On a 12-month basis, producer prices rose 4.7%, a sharp pullback from June's 5.5% pace and under the 4.9% consensus. Core PPI, which strips out food and energy, rose 0.2% for the month against a 0.3% forecast, with the annual rate easing to 4.2% from 4.7%.
Energy Did the Heavy Lifting
The goods side of the ledger drove the miss. Final demand goods prices fell 0.7%, led by a 3.1% drop in energy and a 5.7% slide in gasoline. Food prices at the wholesale level declined 0.9%.
Services were less obliging. Final demand services prices still rose 0.2%, and construction prices climbed 2.2% — a reminder that the disinflation running through the report is concentrated in the most volatile categories rather than the sticky ones the Fed watches most closely.
The PPI figures land one day after the July Consumer Price Index showed headline inflation at 3.4% year over year with a 0.1% monthly gain, and core consumer inflation cooling to its slowest pace since 2021. "Inflation will be within spitting distance of the Fed's target" if the trend continues, Moody's Analytics chief economist Mark Zandi said following that release. KPMG chief economist Diane Swonk credited part of the improvement to retailers, noting "there was a major effort by big-box discounters and grocery chains to roll back some of their prices."
Labor Market Holds Its Range
A separate release Thursday showed initial jobless claims rose 9,000 to 209,000 for the week ended August 8, above the 202,000 economists surveyed by Reuters expected. The prior week was revised up to 200,000 from 199,000, while the four-week moving average held at 199,000. Continuing claims fell 22,000 to 1.777 million for the week ended August 1.
Claims remain inside the 189,000–230,000 band that has defined 2026, suggesting last month's surprise 23,000-job payroll decline has not yet turned into broader layoffs.
Markets Price Out the Hike
The reaction was immediate in rates. The 2-year Treasury yield fell to 4.176% and the 10-year eased to 4.652% as traders trimmed the odds of a September rate increase. The Fed has held its target range at 3.50%–3.75%, though three policymakers dissented at the July meeting in favor of a quarter-point hike — a hawkish minority that Thursday's data makes harder to expand.
Equities drifted higher on the news, with the S&P 500 up 0.29%, the Dow adding 0.24%, the Nasdaq up 0.23% and the Russell 2000 leading at 0.61% in early trading. Gold traded near $4,374 an ounce after opening above $4,400 for a fourth consecutive session, with the metal up nearly 10% over the past month as rate-hike expectations dissipated.
Attention now turns to the PCE price index, the Fed's preferred inflation gauge, for confirmation that the cooling is real before the September policy meeting.
Sources: U.S. Bureau of Labor Statistics (Producer Price Index, July 2026); CNBC; Reuters via Yahoo Finance; TradingKey; TipRanks