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First Cut: June Final Demand PPI restrained by energy costs, but food and services prices up

The Final Demand PPI for June showed producer prices up 0.1% from May, and up 1.7% compared to June 2017. The core PPI — excluding food, energy, and trade services — was flat month-over-month, but up 2.1% from a year ago.

Energy costs fell 3.1% in June from May, driven by a 5.0% decline for gasoline prices. Food prices were up 0.6%, and saw sharp increases in fresh fruits (up 13.7%), grains (up 16.8%), and eggs (up 24.7%). Final demand for services was up 0.4%, reflecting a steep rise for trade services (up 1.3%). Final demand less trade services only (about 80% of total final demand) was down 0.2% in June from May.

The PPI is not one of the more closely watched inflation measures in relation to monetary policy, but Fed policymakers will have some extra confirmation here that price pressures are largely confined to services while commodities prices are more volatile and exerting only sporadic upward pressure.

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