US PPI: Price pressure remains fairly tame – Wells Fargo

Data released on Friday showed the Producer Price Index (PPI) during June in the US dropped 0.2% against expectations of a 0.4% increase. Analysts at Wells Fargo explained the plunge in the cost of food and trade services caused the decline in the index. They argue price pressure remains tame, and that the worst of the decline is likely behind us. 

Key Quotes: 

“There was evidence of some input costs moving higher, but broad price pressure appears tame.”

“We do not anticipate renewed inflationary pressure for some time as the economy begins to recover, and we expect the worst of the COVID-induced slump is behind us.”

“One reason consumer inflation has held up a bit better than the PPI is that it includes additional services not covered by the PPI, such as housing, which have largely held up during the crisis. PPI components that feed into the PCE deflator are also beginning to move modestly higher.”