U.S. Markets open in 6 hrs 3 mins

U.S. producer prices jump 11% in June amid higher energy costs

Yahoo Finance anchors discuss the latest producer price index (PPI) data showing inflation in wholesale goods.

Video Transcript

AKIKO FUJITA: More economic data coming out today. Yesterday, we were talking about CPI. More inflation data today. Producer price index, this is obviously a good gauge of wholesale and business prices. PPI for final demand jumping 11% year on year in June. But 90% of that came from a jump in prices for final energy demand, which, by the way, was up 10% in the month. Here's one thing, though, and I'd be curious to get your take, Brian. You strip out food and energy, if you're talking about core CPI, it did decelerate just slightly.

BRIAN CHEUNG: Yep.

AKIKO FUJITA: So yes, just slightly, a 0.3% increase month on month versus other estimates that were expecting a little more. This comes against the backdrop of commodity prices starting to pull back a little, right? We've been talking about gas prices, oil prices, but also food, raw materials. I mean, again, you don't want to make too much of one data set, but that does sort of raise the question, are we starting to see a slowdown a bit?

BRIAN CHEUNG: Yeah, well, and I think that, for what it's worth, we just need a baseline here because a lot of our viewers are probably like, I thought we are-- I thought we got inflation data already. It's not Groundhog Day. We got CPI, the Consumer Price Index, yesterday. And then today, we got the Producer Price Index. And the big differentiator between those two things is that the Consumer Price Index is what the consumer pays, as the name implies.

AKIKO FUJITA: This is for businesses.

BRIAN CHEUNG: --whereas this is what the business expenses and kind of all the costs that it--

AKIKO FUJITA: And the price difference.

BRIAN CHEUNG: Right, exactly, and the difference there. So that might explain why this number is a little bit higher. Because when you think about, for example, health care costs, well, the consumer that's getting the health care being provided is having the insurance absorb a lot of the costs, right? That explains some of the gap between CPI and PPI, not all of it. But it's gasoline, as you mentioned, that's really the big thing there, 18.5% increase in this particular report. If you strip that out, the core number looks OK.

But again, thematically-- we've been talking about this for all the inflation reports-- that's not a satisfactory lens by which to view these reports from the average American standpoint because a lot of the expenditures that they have is what they're pumping into their cars on a weekly basis to get to their jobs or to get from place-- you know, to the grocery store.

So really, at the end of the day, those types of things haven't alleviated or changed the overall narrative, which is that there is still a lot of inflation that's out there right now. Fed's not satisfied with that. That's why you have Fed Governor Chris Waller saying right now, well, he supports the "less aggressive," after yesterday's report, 75 basis point move. But depending on retail sales and housing data, those are going to be two critical reports, he could be swayed perhaps to the one percentage point increase.

AKIKO FUJITA: Yeah, well, I guess you could argue that, yes, maybe things haven't-- they haven't peaked. We can't call the peak just yet. But the data that we get now is backwards looking. And so the fact that we saw some deceleration there, is there a sign of more that's happening now that can point to a bit of a slowdown, at least in the rate of increases we've seen in costs?