The producer price index was unchanged in June, in an interesting way.
The BLS reports Producer Prices for Final Demand was unchanged in June.
For starters, the BLS revised May PPI from 0.1 percent to 0.3 percent, an upward revision of 0.2 percentage points.
This effectively makes today’s report of 0.0 percent look more like 0.2 percent. Now let’s discuss the current report.
Final Demand Goods
- Prices for final demand goods rose 0.3 percent in June, the largest increase since moving up 0.3 percent in February.
- Over half of the broad-based advance in June can be traced to the index for final demand goods less foods and energy, which climbed 0.3 percent.
- Prices for final demand energy and for final demand foods also rose, 0.6 percent and 0.2 percent, respectively.
- Within the index for final demand goods in June, prices for communication and related equipment increased 0.8 percent.
- The indexes for gasoline; residential electric power; canned, cooked, smoked, or prepared poultry; meats; and tree nuts also moved higher.
- Prices for chicken eggs dropped 21.8 percent. The indexes for natural gas liquids and for thermoplastic resins and plastics materials also declined.
Final Demand Services
- Prices for final demand services edged down 0.1 percent in June after increasing 0.4 percent in May.
- Leading the decrease, the index for final demand services less trade, transportation, and warehousing declined 0.1 percent.
- Prices for final demand transportation and warehousing services fell 0.9 percent, while margins for final demand trade services were unchanged.
- Over half of the June decline in the index for final demand services can be attributed to prices for traveler accommodation services, which fell 4.1 percent.
- The indexes for automobiles and automobile parts retailing, deposit services (partial), airline passenger services, and food and alcohol wholesaling also decreased.
- Conversely, prices for portfolio management advanced 2.2 percent. The indexes for machinery, equipment, parts, and supplies wholesaling; furniture retailing; and apparel, jewelry, footwear, and accessories retailing also rose.
As you can see from the lead chart, services are slightly more than double the weight of goods in the overall index.
I added a second decimal place to better show this. Services declined 0.14 percent while commodities rose 0.23 percent with the net ay -0.04 percent.
PPI Final Demand Year-Over-Year
PPI Final Demand Year-Over-Year Details
- Final Demand: 2.3 Percent
- Final Demand Goods: 1.7 Percent
- Final Demand Services: 2.7 Percent
- Final Demand Food: 3.3 Percent
- Final Demand Excluding Food and Energy: 2.6 Percent
If you are prone to cheerleading the year-over-year decline in final demand from 2.7 percent down to 2.3 percent, don’t.
The year-over-year decline is entirely due to an easy comparison from June 2024 of 0.4 percent. Anything under was guaranteed to cause a decline.
In July, the comparison will be 0.0 percent (more accurately 0.03 percent). Anything above that will cause a year-over-year rise.
So unless there is another benign report, the year-over-year numbers will rise back up next month.
Was This a Good Report?
Judging from the headline numbers alone, I would say yes. The Fed had been very concerned about stubborn service inflation.
However, the details are not convincing.
The mix now looks like higher prices in goods with falling demand for travel. Services related machinery, parts, jewelry, and even footwear, rose.
The prices for communication and related equipment increased 0.8 percent. That screams of rising tariffs.
Translated to Consumer Prices
Translated to consumer prices, the report indicates falling demand for discretionary services like travel, but rising prices for goods due to tariffs.
This is a potential stagflationary outcome depending on the precise path forward.
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July 15, 2025: Year-Over-Year CPI Jumps 0.3 Percentage Points to 2.7 percent
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July 15, 2025: Real Hourly Earnings of Private Workers Decline 0.1 Percent in June
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Inflation is not prices rising but to many dollars being printed by the FED chasing to few items .. BIG DIFFERENCE!!!!
1) The Fed balance sheet is actually contracting.
2) Congress is doing what Trump wanted – spending like drunken sailors
So I need a new roof (somewhat soon). It’s three tab…25 years old. Do I get Juan and crew to do it now or wait until “the recession”? Juan wants (i’m guessing based on what my neighbors paid) ~$25k. I know he’ll come in and bang it out, but if I can wait a bit longer…get another year or two out of it, maybe I hit Juan when he’s hungry (if he and his Honduran crew are still here!). I have no idea where three tab is manufactured these days…Canada? Vietnam? BRICS? Detroit? /s
05/1/2024 ,,,,, 3376.1
06/1/2024 ,,,,, 3379.7
07/1/2024 ,,,,, 3302.2
08/1/2024 ,,,,, 3321.1
09/1/2024 ,,,,, 3236.8
10/1/2024 ,,,,, 3211.6
11/1/2024 ,,,,, 3256.8
12/1/2024 ,,,,, 3240.4
01/1/2025 ,,,,, 3255.6
02/1/2025 ,,,,, 3261.2
03/1/2025 ,,,,, 3408.3
04/1/2025 ,,,,, 3355.0
05/1/2025 ,,,,, 3262.9
Total reserve balances have been flat for 13 months. That is a restrictive money policy. Inflation is destined to fall in the last part of 2025.
Who looks at yearly inflation? What’s important is the MoM inflation or lack of. Trump’s tariffs have been on since beginning April. It’s been four months now we have been promised that by now inflation should be through the roof. By any measure that is not happening. Instead of saying it’s just around the corner it would be better to seek the reasons why. I repeat. Talk to those who export to the US and ask them. They will tell you. If you don’t know any then you are out of the loop. If the input assumptions in your model are off your output will be off by much more.
Which large group of legitimate economists said “by now inflation should be through the roof“?
It’s OK if you disagree with standard economic methodology and forecasts, but you don’t have to be hyperbolic. It makes you look like you’re floundering for an answer for why people don’t appreciate your POV.
Imports are about 14% of total US GDP. Even if they all went up in price significantly, total inflation would only go up so much. But that also doesn’t mean that tariffs won’t impact inflation some eventually, and certainly specific products that some consumers don’t want to pay more for.
I am sure you are disappointed that the tariffs didn’t have the negative effects that you predicted. Have you asked an exporter to the US how they handled the tariffs? I bet not so you have no idea. You are working on no information and hoping that your macroeconomic view will somehow happen.
Hey everyone, Doug has solved our measurement problem .
“Knock, knock. Hi, I’m a sociologist with the US government. Are you the owner/manager of Chinese Umbrella Manufacturer #1,078?
Great. Can you tell me how you have changed the pricing of your umbrellas each month since January due to the imposition of US import taxes on Chinese goods?
Yes, sir, I realize you don’t actually pay US import taxes. Nor have you actually ever seen your umbrella or its final price in the Target store in Des Moines, Iowa. Can you just answer this simple question?
Are these tariff structures changing each month? Yes. But that shouldn’t matter because my boss Scott Bessent says you have reduced your prices no matter the tariff size or future certainty.
No, sir, I don’t care about international exchange rates or how they affect your pricing to US consumers. Just give me a price change, please.
You reduced your price by 3 yuan last month. Great, that’s all I need to know. No sir, I don’t need to know your Chinese state-sponsored steel supplier saved you 6 yuan in production costs last month. Please, sir, there is no question on this form for whether you invested in new AI or machinery to make you more productive. Your population is growing and so you have more applicants willing to work for less? That’s out of my purview.
Again sir, you have given me that answer I need for my boss to report to President Trump. I have to go now. I need to travel to central America to interview Mexico Tomato Grower #11,613. Thank you for your time on behalf of the US government. No sir, we don’t want to bomb you out of existence – yet.”
Still, the overall number nets out to zero, so nothing to see here.
Move along, kiddos!
As for firing Powell?
Trump seems to turn on everyone around him, I’m pretty sure that his complaints are related to trying to calm the Epstein storm.
Not gonna work Mr. Trump. We all know you are an abusive pervert!
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For all practical purposes, MAGA is the new NAMBLA.
Imagine the irony of believing pizzagate and then electing an honest to God child predator
And quite a bit of frot running of inventories has been accomplished. After tariffs go into effect I expect quite a slowdown of imports.
At some point Trump is going to be foolish enough to back up all of his bluffs with some non~TACO economic bombing…
Hopefully the courts will block him and congress will get the upper hand again.
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Foreign tourism to the US has fallen precipitously and that takes a big bite out of services.
Trump will not notice, since he excludes services entirely from his thoughts on global trade relationships.