The plunge in energy prices pushed down overall PPI inflation, to a still very high 5.5%. It has been zigzagging higher since mid-2023.
By Wolf Richter for WOLF STREET.
Energy prices plunged in June off the spike in the prior months. And this plunge in energy prices spread through the Producer Price Index final demand (PPI), which tracks inflation in prices that companies pay each other, and which dropped by 0.28% seasonally adjusted in June from May (annualized -3.3%, blue in the chart).
Year-over-year, the PPI rose by 5.5%, still a lot of inflation, but lower than the multi-year high in May (red). It has been zigzagging higher ever since the low point in mid-2023.
Beyond the plunge in energy, producer-price inflation accelerated in June from May and year-over-year because inflation in services accelerated.
The services PPI rose by 0.21% in June from May (+2.5% annualized), seasonally adjusted, after the negative reading in the prior month.
Year-over-year, the services PPI accelerated to 4.6% (red line). That’s a lot of inflation in services. It has been zigzagging higher since the December 2023 low.
Within the services PPI, month-to-month:
- Trade services (19% of overall PPI) rose by 0.4% in June from May, after the 2.3% plunge in May and the 1.3% spike in April.
- Transportation & warehousing services (4.9% of overall PPI) dipped by 0.1% in June from May, after a series of month-to-month spikes.
- “Other services” (38% of overall PPI) ticked up by 0.1% in June from May.
The PPI for core goods, which excludes energy and food components, rose by 0.19% (+2.3% annualized) in June from May, seasonally adjusted, on top of the spikes in the prior two months (blue line in the chart below).
The year-over-year core goods PPI rose by 5.1%, a slight deceleration from the prior month, and both were the worst since February 2023 (red line). It has been zigzagging higher since March 2024.
These were prices that companies paid other companies. In 2025, those prices started to include tariffs that companies were passing on to each other, though consumer-facing companies had a very hard time or were incapable of passing on those price increases to consumers without losing a lot of sales and market share. So consumer-facing companies resisted price increases from their suppliers.
Core PPI Final Demand, which excludes energy and food components, accelerated to +0.20% (+2.4% annualized) in June from May, seasonally adjusted (blue in the chart below).
Year-over-year, core PPI accelerated by a hair to 4.7%. The last three months were the worst since January 2023. It has been zigzagging higher since the low in December 2023 (red in the chart below).
The core PPI is dominated by the services PPI, which is why its trajectory looks similar to the services PPI.
The PPI final demand for energy plunged by 6.4% in June from May (not annualized), after the three months of spikes.
Year-over-year, the energy PPI is still up by 23.0%.
The chart shows the price level of the energy PPI, rather than the percentage change.
The PPI final demand for food fell by 0.58% (-6.8% annualized) in June from May (blue).
Year-over-year, it rose by 2.1% (red). Food prices are very high after the surge in 2021 through 2022, but from those high levels have been increasing only moderately over the past year.
In case you missed it: Gasoline Plunged in June and lots of Month-to-Month CPI Squiggles Happened to Drop Simultaneously, but that Won’t Last
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But…but WH said it’s dropping
In August 2022, Biden said there was “0% inflation” referring to the July 2022 CPI. They’re all the same in different ways 🤣
Dummies who think the president sets the price of gasoline seem to be a constant over the decades.
Of course, in Trump’s case he’s doing everything in his power to raise the price of gasoline, so perhaps we’re full circle.
Russia’s getting bailed out.
producers have raised their prices and will continue to do so
cat is out of bag and we’re now in 70’s(worse given massive debt) devaluation of fiat $dollar
gotta thank GRIFTERS in CONSgress
Dear Mr Richter,
completely off-topic here:
Do you plan to write a piece about your recent hiking trip in the Alps – something in Jim Roger’s “Investmentbiker” style about what you saw on the ground during your trip and how this relates to the local economy and the overall “socio-economic” situation there.
I think it would be great to have you share some of your observations and conclusions.
Thanks for everything you are sharing here with us.
I don’t intend to write that piece. But I can tell you this: The Alps are beautiful but fully industrialized: tree-farming up to the timberline, dairy farming all the way to the end of the meadows, and tourism (summer and winter). All of it heavily government subsidized. People have invested immense amounts building and remodeling hotels everywhere in the mountains in that cute lederhosen architecture that is required in many locations. Those hotels are NICE! So when you do that kind of stage hike we did, you see all of it, the entire local economy. It’s quite impressive. There is a lot of wealth in these places. That heavily subsidized dairy farmer with his 30 cows, pastures, and the beautiful and expanded farmhouse that now has 10 gorgeous rooms…
Our family (3 kids, ages 5 and below) are in the alps now at a Kinder Resort. This is one of Wolf’s aforementioned quaint hotels turned monstrosity luxury getaway. I have to say, I’m shocked this model does not exist in the US. US families with small children seem to either be tricked into spending a small fortune on a crappy Disney experience or slumming it at a budget “lodge” style place that’s best days were in the 50’s or 80’s.
We will continue exporting our hard earned US dollars to EU/Germany for this amazing experience!
The funny thing is that that dairy farmer with his heavily subsidized 30 cows gets the biggest chunk of the EU budget every year, but he likely hates the EU and votes for a party that claims to want to leave it. Same for the German (AfD) or Austrian (FPÖ) side of the border, though moreso in Austria.
They know they are lying,
we know they know they are lying,
they know we know they are lying,
…and they are still lying.
Arguably the current admin is the absolute worst though. And we were given hints – ever since the ‘using a Sharpie to hurricane zone’ incident.
Warsh the Grim Reaper, is sharpening his scythe, to cut down inflation, even though the problem is high oil prices, and not too much economic growth.
W2 workers are going to lose a lot under him.
Lots of inflation, almost everywhere.
Inflation makes the burden of fixed rate mortgage go down over time.
Works for me, even if food and gasoline and property taxes are higher.
I’m sorry, what? Talk about a uni-dimensional response. Inflation makes house prices rise. Gotcha. But it also makes ALL other costs increase. How is your pay doing? Is it increasing at or above the rate of inflation? Because for many people with a college degree, inflation doesn’t mean costs increase, but rather the value of the dollar decreases.
@Greg P, most people that own homes are happy to see them go up in value with inflation. For most people (and all people with super expensive homes) the increase in value of their home is more than the increase in the cost of other things.
Inflation is high.
Feel free to cut.
I’m tired of inflation taking its toll on wages.
Before I get my check to pay my bills I have a lot less.
Not fun.
You might have to change jobs to get a pay raise.
That’s what I did last time I was W2 employee.
W-2 workers have been losing for a long time…..this newest slime ball “investor” is just piling on to increase the wealth extraction……
Winner take all?
Not on a finite ball in space….this sick game will never get that far….but maybe called due to rain……?
Inflation is the one form of taxation that can be imposed without legislation.
Milton Friedman
That doesn’t apply to the interest portion of mortgage payments, which is my single biggest expense item.
Inflation is my friend, as long as my revenue goes up more than the other expenses, which has been happening.
Maybe you should think about someone other then yourself
I used to think the same about the 99% of the population that never served in the country’s armed services.
Then I realized individuals are free to make whatever (legal) choices they choose with their freedom without some value metric being assigned.
11b10 9th Inf 67-8….I take the obligatory, “Thank you for your service” now, even though it pisses me off so much it is hard not to reply with, “You lying bastard!”
It’s a funny flex, bragging about a mortgage.
I guess I’m guilty of bragging about my 3.5% hysa lol.
So is Uncle Milty’s “supply side Econ theory”….aka “trickle down”.
Love that Chicago School of Econ output…..lots of Nobelers (maybe TOO many?) and plenty of financial support by some interesting characters…..it’s worth a read-up on it, honest!
Wolf, your recent very hard work every day to keep us informed about developments in inflation and Treasuries, including background info about the “Treasury basis trade” etc., is very much appreciated!
Seems like the economic impact of immigration policy would show up clearly in PPI. Has there been an analysis of that lately?
All you have to do is divide PPI by the number of immigrants in the US. PPIPI = Producer Price Inflation Per Immigrant.
Don’t forget to subtract out the the PPIPC. Lolol
A big dividend cut and a $2 billion charge: Conagra’s results signal more pain ahead for food industry
Conagra owns and controls many food brands, including frozen foods Marie Callender, Banquet, Hungry Man, and PF Chang, all which contain ridiculous amounts of fat and sodium. I’m glad most frozen foods are smaller and more expensive than they were pre Covid, I have a good excuse to avoid them.
Is it the canary in the coal mine?
Is the easy no problem raising prices over?
“ * Higher costs for ingredients, packaging, and transportation.
* Consumers trading down to lower-priced private-label brands.”
The fact that rate hikes are even up for debate instead of being an instant response tells us the Fed is not serious about 2%.
IMO one of the reasons why the Fed is reluctant to raise interest rates is because it raises the cost to service our now $39T debt. Sadly because of our debt, raising interest rates to anchor inflation has become a problem for the Fed to use as a tool to control inflation anymore! 😕
Why does the Fed need to raise rates.
Treasuries etc. are already clearing in the market at elevated prices as regularly presented here in wonderful detail.
The .gov interest bill is increasing regardless of what the Fed is currently doing.
Dr. William Barnett’s “CFS Divisia M4, which is the broadest and most important measure of money, grew by 6.9% in May 2026 on a year-over-year basis versus 5.9% in April.”
I don’t know how he weights aggregates, but he’s been more accurate than most.
All I see is that all of the increase in m2 came from demand deposits since July last year. That increases AD/GDP. DDs are means-of-payment money. Nominal GDP seems too high.
The FED has two choices:
Look “through” the return of higher oil and endless war and cut rates
or,
Look through the June dip in an otherwise upward slope of inflation and raise
Everybody knows they will “look through” bad inflation data EVERY SINGLE TIME to avoid rate hikes. However, they will hammer rates to the floor at the drop of a hat.
What the Fed does is becoming less relevant as congress refuses to actually do their job and be fiscally responsible.
The “leadership” is choosing to take us to war instead of hold anyone accountable. It seems humanity never learns. New world order, same old lies, etc. etc.
Hedge accordingly.
I am seeing some absolutely BANANAS price increases in all sorts of things which are not service related. Over 25% on certain materials, etc. I guess we’re in for 6 more years of misery so greedy billionaire f**ks don’t have to experience a small dent in their net worths.
Just 6? You are turning into an optimist?
This is the best time for I mean anyone to make a fortune with their talent and skills and know how.
Sure we are inching along slowly from a plutocracy to a kleptocracy but that just means adapt and increase the skills needed for success.
Friend started a business in 2022, 2026 making 5M a year with a 40% margin. America may have a ton of faults but still the best place on the planet to make $$.
“but that just means adapt and increase the skills needed for success.”
The most important “skill” being a complete lack of morality.
Yep. Empathy is always bad for busy-ness……unless faked and exploited for sales or “good will” purpose.
A Medicare related business, by chance?
Automotive related, wish I knew how to milk the gov in that sector or else is open another business.
Too old to run a business then I have no knowledge in..
🤣❤️
Yep. The second wave of inflation is just getting started. It’s the summer of 73′ again, but this time without the cool muscle cars and cheap gas. This time America also has almost 40 trillion is debt that also needs to be serviced.
Interesting times.
The financial shows are nothing but infomercials for the stock market.
“Record drop in inflation.”
“Deflation is happening.”
Never is there a counter to these declarations. No one to say, “but that’s not entirely accurate.”
Control the narrative and thus the perception. It is rough being a contrarian when they are all “in on it”.
We just got our property tax for 2026. $10,700. When we moved here in 2000 the bill was just over $3K. The house has less than 1,400 sq feet of living space and is 75 years old. What a f%ckin ripoff.
Must be east coast or Texas? Breck home was 13k in 2022 at 4x that size, was only 1k for years but summit finally fixed the ag loop hole in 2019.
Sounds like Chicagoland
And it still ain’t enough
When I hear some lamebrain say we need to “raise taxes” to pay down the debt I think, “How’s that working in Chicago?”
Illinois doubling its Tollway fees.
Heres a beauty. In IL, the estate taxes threshold is $4 Million.
If your estate is less than $4 Million, no state estate tax.
If it is ONE DOLLAR OVER, you are taxed on the entire estate! (Not the amount over the threshold number of $4 Million)
Is there a more effed up state? Even CA restricts real estate taxation.
One of the (ever shrinking) good things about living in CA is that the 1978 Prop 13 limits propery tax increases to a max of 2%/year.
A benefit to one person is a cost for another. There’s nothing good about transferring wealth from homeowners to non-homeowners. Government should just stay out of it.
So, in 25 yrs your property tax has increased on avg by about 5 1/2% per yr.
What is the value of your house today and , what did you pay for it in 2000 ?
Doesn’t seem to be too crazy if the valuation has grown by 3 1/2 times.
maybe, but 10k prop taxes on a small 1400 sq ft 75 year old house does seem a little toward the “high tax” end of things. Where does grandma who is living on social security come up with 800/mo? I only mention the great state of Illinois because their property values had stayed pretty flat for many years while taxes skyrocketed to pay for all of the public employee salary and pension largesse. Even they (IL) have participated in this recent bubble though.
I’m wondering how much of this is data center build outs including the energy equipment sector to support them. It’s well over a trillion dollars in spend to build all of it, without even seeing a profitable return on what they got as they still figure out how to monetize all of it.
The AI investment boom, these hundreds of billions of dollars that are getting thrown around left and right, are spreading into all kinds of industries, air freight (getting the servers to the US and moving them within the US), trucking companies, equipment manufacturers of all kinds, especially electrical equipment and power generation equipment, construction and everything that it entails (PPI for construction materials has shot up), all the services that are involved in all of this… this stuff is now percolating through the economy everywhere.
It will be a rough moment when the investment boom gets a haircut.
I think you need to adjust your haircut target down about 10″ to the neckline area.