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The producer price index was unchanged in June, in an interesting way.
 

Producer Price Index Month-Over Month, BLS Data, chart by Mish

The BLS reports Producer Prices for Final Demand was unchanged in June.

For starters, the BLS revised May PPI from 0.1 percent to 0.3 percent, an upward revision of 0.2 percentage points.

This effectively makes today’s report of 0.0 percent look more like 0.2 percent. Now let’s discuss the current report.

Final Demand Goods

• Prices for final demand goods rose 0.3 percent in June, the largest increase since moving up 0.3 percent in February.
• Over half of the broad-based advance in June can be traced to the index for final demand goods less foods and energy, which climbed 0.3 percent.
• Prices for final demand energy and for final demand foods also rose, 0.6 percent and 0.2 percent, respectively.
• Within the index for final demand goods in June, prices for communication and related equipment increased 0.8 percent.
• The indexes for gasoline; residential electric power; canned, cooked, smoked, or prepared poultry; meats; and tree nuts also moved higher.
• Prices for chicken eggs dropped 21.8 percent. The indexes for natural gas liquids and for thermoplastic resins and plastics materials also declined.

Final Demand Services

• Prices for final demand services edged down 0.1 percent in June after increasing 0.4 percent in May.
• Leading the decrease, the index for final demand services less trade, transportation, and warehousing declined 0.1 percent.
• Prices for final demand transportation and warehousing services fell 0.9 percent, while margins for final demand trade services were unchanged.
• Over half of the June decline in the index for final demand services can be attributed to prices for traveler accommodation services, which fell 4.1 percent.
• The indexes for automobiles and automobile parts retailing, deposit services (partial), airline passenger services, and food and alcohol wholesaling also decreased.
• Conversely, prices for portfolio management advanced 2.2 percent. The indexes for machinery, equipment, parts, and supplies wholesaling; furniture retailing; and apparel, jewelry, footwear, and accessories retailing also rose.

As you can see from the lead chart, services are slightly more than double the weight of goods in the overall index.

I added a second decimal place to better show this. Services declined 0.14 percent while commodities rose 0.23 percent with the net ay -0.04 percent.

PPI Final Demand Year-Over-Year
 

Producer Price Index Year-Over Year, BLS Data, chart by Mish

PPI Final Demand Year-Over-Year Details

• Final Demand: 2.3 Percent
• Final Demand Goods: 1.7 Percent
• Final Demand Services: 2.7 Percent
• Final Demand Food: 3.3 Percent
• Final Demand Excluding Food and Energy: 2.6 Percent

If you are prone to cheerleading the year-over-year decline in final demand from 2.7 percent down to 2.3 percent, don’t.

The year-over-year decline is entirely due to an easy comparison from June 2024 of 0.4 percent. Anything under was guaranteed to cause a decline.

In July, the comparison will be 0.0 percent (more accurately 0.03 percent). Anything above that will cause a year-over-year rise.

So unless there is another benign report, the year-over-year numbers will rise back up next month.

Was This a Good Report?

Judging from the headline numbers alone, I would say yes. The Fed had been very concerned about stubborn service inflation.

However, the details are not convincing.

The mix now looks like higher prices in goods with falling demand for travel. Services related machinery, parts, jewelry, and even footwear, rose.

The prices for communication and related equipment increased 0.8 percent. That screams of rising tariffs.

Translated to Consumer Prices

Translated to consumer prices, the report indicates falling demand for discretionary services like travel, but rising prices for goods due to tariffs.

This is a potential stagflationary outcome depending on the precise path forward.

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