US producer prices unexpectedly declined in June, extending the disinflationary message delivered by Tuesday’s softer consumer inflation report. The Producer Price Index fell -0.3% mom, compared with expectations for a 0.2% increase, while annual producer inflation slowed from a revised 6.0% yoy to 5.5% yoy. The downside surprise suggests pipeline inflation eased more sharply than markets anticipated before the latest resurgence in oil prices, reinforcing expectations that the Federal Reserve has additional time to assess inflation risks.
The weakness was concentrated in goods prices, which fell -1.4% mom, the largest monthly decline since July 2022. Energy prices plunged -6.4%, led by a -12.0% drop in gasoline prices, accounting for nearly two-thirds of the decline in final demand goods. Food prices also slipped -0.6%. By contrast, core goods excluding food and energy still increased 0.2%, while final demand services rose 0.2%, reflecting firmer retail margins and selected business services.
The Fed’s preferred measure of underlying producer inflation, final demand less foods, energy and trade services, edged up just 0.1% after surging 0.8% in May, with the annual rate holding at 5.1%.
Together with Tuesday’s CPI report, the latest PPI figures strengthen the case that inflation pressures moderated significantly through June before the recent jump in crude oil prices. That leaves policymakers with greater flexibility in the near term.
Economic Data
| Indicator | Actual | Expected | Previous |
|---|---|---|---|
| PPI (MoM) | -0.3% | 0.2% | 0.6% (rev.) |
| PPI (YoY) | 5.5% | 6.2% | 6.0% (rev.) |
| Final Demand Goods (MoM) | -1.4% | — | 2.3% |
| Final Demand Services (MoM) | 0.2% | — | -0.1% |
| Final Demand Less Food, Energy & Trade (MoM) | 0.1% | — | 0.8% |
| Final Demand Less Food, Energy & Trade (YoY) | 5.1% | — | 5.1% |
| Energy Goods (MoM) | -6.4% | — | 8.4% |
| Food Goods (MoM) | -0.6% | — | 0.5% |
| Goods Less Food & Energy (MoM) | 0.2% | — | 0.7% |
Market Takeaways
- Headline PPI unexpectedly fell, reinforcing the softer inflation message from June CPI.
- Producer inflation slowed to 5.5% yoy, below expectations, while monthly prices posted their first decline since early 2025.
- Energy prices remained the dominant driver, with gasoline tumbling 12.0%, producing the largest decline in final demand goods since July 2022.
- Core pipeline inflation was more subdued than May, with the Fed’s preferred underlying producer price gauge rising just 0.1% mom.
- The combined CPI and PPI reports suggest inflation pressures eased materially through June, giving the Fed greater flexibility despite the recent rebound in crude oil prices.
- Markets will now focus on whether Brent’s surge above $85 feeds into producer prices in coming months, reversing June’s disinflation trend.
