In July, the plunge in energy prices migrated into services via truck transportation services and others.

By Wolf Richter for WOLF STREET.

The Producer Price Index final demand, which tracks broad inflation in prices that companies pay each other, edged down 0.03% in July from June (annualized -0.3%, blue in the chart), held down in part by the PPI for energy, which plunged for the second month in a row in July. These energy prices are part of the input costs for companies, and it spread across industries, including the services PPI via truck transportation services and other services, where energy costs weigh heavily.

But June was substantially revised higher today, to -0.1% today from -0.28% reported originally a month ago, on a massive up-revision of the services PPI.

Year-over-year, the overall PPI rose by 4.7%, still a lot of inflation, but lower than the multi-year highs in the prior three months of 5.5% to 5.9% (red). The PPI has been zigzagging higher ever since the low point in mid-2023.

The services PPI rose by 0.20% in July from June, held down by prices of truck transportation of freight, which plunged by 1.8% month to month, due to the plunge in energy prices.

The services PPI accounts for 68% of the overall PPI final demand. It’s the biggie.

But inflation was in the revision. A month ago, the BLS reported that the June services PPI rose by 0.21% in June from May. Today, it more than doubled that inflation for June to +0.47%.

Year-over-year, the services PPI rose by 3.9%, a deceleration from the upwardly revised June reading (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:

• Transportation & warehousing services PPI plunged by 1.8% in July from June, second month in a row of declines, tracking the plunge in the energy PPI. This includes the 1.8% month-to-month plunge of truck transportation of freight. The index accounts for 4.9% of overall PPI.
• Trade services inched up by 0.1% in July from June, on top of the massively upwardly revised 1.4% spike in the prior month (originally reported as +0.4%). The index accounts for 19% of overall PPI.
• “Other services” rose by 0.6% in July from June. The index accounts for 38% of overall PPI.

Core PPI Final Demand rose by 0.24% seasonally adjusted (+3.0% annualized, blue in the chart below). The index excludes energy and food components, and dominated by the services PPI, and the charts look very similar.

But June was revised massively higher, nearly doubling from the originally reported increase of +0.20% to today’s reported revised increase of +0.39% (+4.8% annualized), driven by the massive up-revision of the services PPI.

Year-over-year, core PPI rose by 4.2%. The four months of April through July were the worst since January-February 2023. It has been zigzagging higher since the low in December 2023 (red in the chart below).

The PPI for core goods, which excludes energy and food components, rose by 0.13% (+1.6% annualized) in June from May, seasonally adjusted, after the spikes in April and May (blue line in the chart below).

Year-over-year, it rose by 4.9%, a deceleration from the upwardly revised increase in June. The last three months were the worst since February 2023 (red line). It has been zigzagging higher since March 2024.

The PPI final demand for energy plunged by 3.1% in July from June (not annualized), secondly monthly plunge in a row, after the three months of spikes.

Year-over-year, the energy PPI is still up by 17.9%.

The chart shows the price level of the energy PPI, rather than the percentage change.

The PPI final demand for food fell by 0.93% in July from June, the second decline in a row (blue).

Year-over-year, it was unchanged. Food prices are very high after the surge in 2021 through 2022, but the further increases from those high levels have slowed over the past two years.

In case you missed it:  CPI Dragged Down by Energy, Hotels & Motels (Shelter), Auto Insurance, and Meat (Finally)

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