U.S. Producer Price Index Rises by 0.3% in July, Exceeding Expectations

On Friday, the U.S. Department of Labor said its Producer Price Index rose by 0.3% in July following June’s revised flat reading of 0.0%. According to consensus forecasts, the data was higher than expected, with economists looking for an increase of 0.2%

In the last 12 months, wholesale inflation rose 0.8%, the report said, well above June’s revised 0.2% reading and above the consensus forecast of 0.7%. Meanwhile, stripping out volatile food and energy prices, the data showed that core inflation rose 0.3% last month, also coming in higher than June’s revised -0.1% reading. Consensus forecasts were looking for a 0.2% increase.

The gold market is seeing a modest selloff in reaction to the latest forward-looking inflation numbers, as the previous month’s downward revisions moderate the higher-than-expected readings for July. Spot gold returned to virtually flat on the session, last trading at $1914.49 an ounce, up 0.13% on the day.

Economists pay close attention to producer prices as it is a leading indicator for consumer prices. Traditionally, companies pass on higher costs to their customers. Economists have said that the drop in headline inflation is good news for consumers; however, stubborn core inflation indicates that higher prices are becoming embedded in the broader economy.

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