The Producer Price Index (PPI), which measures inflation on the wholesale level, was hotter than expected in June while May’s readings were also revised higher. Headline PPI rose 0.2% last month, with the annual reading also up from 2.4% to 2.6%. Core PPI, which strips out volatile food and energy prices, rose 0.4% and the year-over-year reading increased from 2.6% to 3%.
What’s the bottom line? After June’s cool consumer inflation report, wholesale inflation surprised to the upside. While the PPI report did not move the markets when it was released on Friday, the data is important because some of the components are factored into another inflation measure called Personal Consumption Expenditures (PCE). We will need to see if this causes PCE to be hotter than expected as a result, but thus far expectations are for a low PCE reading when that data is released on July 26.