PPI's upside surprise

Wholesale prices in June exceeded expectations and the May figures were revised higher. The headline gain of .2% was vs a one tenth estimate and May was revised up by 2 tenths. The core rate grew by .4%, double the forecast and May was revised up by 3 tenths. The y/o/y headline gain was 2.6% vs 2.4% last month and the core gain was 3% y/o/y, up from 2.6% in May.

Food and energy prices both dropped m/o/m and ex this, core goods prices were unchanged m/o/m but up 1.8% y/o/y. About 60% of the headline drop in goods prices is due to lower gasoline prices. Service prices is where the upside came from with a .6% m/o/m gain and by 3.5% y/o/y.

With services, the BLS said “Over ¼ of the June advance…can be traced to a 3.7% rise in margins for machinery and vehicle wholesaling.” Also higher were auto/parts retailing, deposit services, computer hardware/software retailing and professional/commercial equipment wholesaling. On the flip side, truck transportation prices fell 1.2% as excess capacity is still apparent in the industry.