enzh-CNfrhiidjakomsesth
Fundamental Analysis

Soft Producer Price Inflation Extends in July

Typography

On broad-based weakness, the PPI for final demand unexpectedly fell 0.1 percent in July - extending the recent decline in the year-over-year rate. This only heightens anticipation for tomorrow's CPI update.

Alert: Chemical Spill

Marking the first monthly decline since August 2016, the PPI for final demand unexpectedly contracted in July. Price declines were broad-based with lower readings in energy and services, while wholesale food prices remained flat.

Services accounted for over 80 percent of the headline's decline, with about 60 percent attributable to a 5.8 percent drop in margins for chemicals and allied products wholesaling.

Outlook Remains Tame

Our favorite measure of core producer prices, ex-energy, food and trade services, was flat on the month, taking the year-overyear rate down modestly to 1.9 percent. It is important to remember the PPI data can be volatile on a monthly basis. That said, today's miss heightens the focus on the July CPI report. From our view, the health of economic fundamentals continues to point to a firming inflation environment in H2.

About the Contributor
Wells Fargo Securities
Author: Wells Fargo SecuritiesWebsite: http://www.wellsfargo.com/
Wells Fargo Securities Economics Group publications are produced by Wells Fargo Securities, LLC, a U.S broker-dealer registered with the U.S. Securities and Exchange Commission, the Financial Industry Regulatory Authority, and the Securities Investor Protection Corp. Wells Fargo Securities, LLC, distributes these publications directly and through subsidiaries including, but not limited to, Wells Fargo & Company, Wells Fargo Bank N.A, Wells Fargo Advisors, LLC, and Wells Fargo Securities International Limited. The information and opinions herein are for general information use only. Wells Fargo Securities, LLC does not guarantee their accuracy or completeness, nor does Wells Fargo Securities, LLC assume any liability for any loss that may result from the reliance by any person upon any such information or opinions. Such information and opinions are subject to change without notice, are for general information only and are not intended as an offer or solicitation with respect to the purchase or sales of any security or as personalized investment advice. Wells Fargo Securities, LLC is a separate legal entity and distinct from affiliated banks and is a wholly owned subsidiary of Wells Fargo & Company © 2010 Wells Fargo Securities, LLC.
More from the contributor