Wholesale Price Inflation Slows Last Month as Gas, Food Costs Fall

Wholesale inflation fell last month as energy and food costs declined, signaling potential relief ahead for consumer prices.

The Labor Department's producer price index, which tracks wholesale inflation, increased 4.7% in July compared with the same month last year, down from 5.5% in June. Month-to-month, wholesale prices remained flat from June to July, following a 0.1% decline in the prior month.

The data aligns with a consumer price inflation report released Wednesday that similarly showed modest cooling. However, consumer prices have outpaced wage growth for the past four months, making it difficult for many Americans to afford essentials like rent and utilities. Continued price growth beyond wage increases could prompt consumers to reduce spending in coming months.

Core wholesale inflation, which excludes volatile food and energy sectors, dropped to 4.2% year-over-year in July from 4.7% in June. On a monthly basis, core prices fell 0.2%, compared with a 0.4% increase from May to June.

Gas prices fell early in July before rising again later in the month and into early August, potentially pushing inflation higher when August figures are reported.

The recent cooling in wholesale prices gives Federal Reserve officials greater flexibility heading into their September meeting, when they will decide whether to raise their key interest rate to combat inflation or hold rates steady while monitoring inflation trends.

Wholesale prices often precede consumer inflation changes. The Fed also monitors components like healthcare and financial services that feed into its preferred inflation measure, the personal consumption expenditures index, due later this month.

Fed officials are weighing a rate increase after leaving rates unchanged through this year. Recent government data showing job cuts in July suggested economic weakness that could discourage the central bank from raising borrowing costs.