[Ferro-Alloys.com]

 

Prices paid to US producers slowed in June to the lowest annual rate since 2020, another sign of cooling inflation in the wake of the Federal Reserve's sharpest course of rate hikes since the 1980s.

 

The producer price index (PPI) — or prices paid to producers for goods, services and construction — slowed to 0.1pc for the 12 months ending in June, down from a 0.9pc rate for the period ended in May, the Labor Department reported today. Analysts had expected a 0.4pc annual gain. PPI peaked at 11.2pc last June.

 

"The Covid inflation shock is over for PPI," said Ian Shepherdson, chief economist at Pantheon Macro. "The Fed does not need to hike further."

 

Today's report follows a report Wednesday that showed consumer prices slowed to an annual 3pc pace in June, the lowest since March 2021, from 4pc in May. Lower supplier prices give companies leeway to pass on lower costs to consumers.

 

Slowing inflation means the Federal Reserve has more time to assess the effects of its aggressive monetary tightening since March 2022, which has taken its target rate up five percentage points. The CME's FedWatch tool gives a 92pc chance the Fed will hike another quarter point at the end of July, with 60pc odds that that hike will be the last increase of 2023, with rate cuts set to start next year.

 

Seasonally adjusted, the PPI rose by 0.1pc in June from the prior month following a 0.4pc monthly decline in May and a 0.1pc gain in April. The monthly PPI for goods was flat in June following a 1.6pc decline in May, while services PPI rose by 0.2pc in June for a second month.

 

Energy goods rose 0.7pc in June on the month following a 6.8pc monthly decline in May. Food fell 0.1pc in June after a 1.4pc monthly decline in May.

 

PPI less food, energy and trade services, considered core PPI, rose 2.6pc for the 12 months through June, following a 2.8pc gain in May and a 3.3pc annual gain in April.