The easing of gasoline prices helped create a drop in the producer price index in July, the Labor Department said Thursday. Photo by Bill Greenblatt/UPI | License Photo
Aug. 11 (UPI) -- Sparked by a plunge in gasoline and energy costs, wholesale prices dropped for the first time in two years in a sign of easing inflation, the Labor Department said.
The producer price index tumbled 0.5% in July, while the year-to-year prices rose 9.8% from July 2021, down from the 11.3% increase in June and nearly two points from the record 11.7% in March.
The July index total was the first price drop since April 2020 While the year-to-year total was the slowest index rise since October 2021.
"In July, the decrease in the index for final demand is attributable to a 1.8% decline in prices for final demand goods," the Labor Department said in its report. "In contrast, the index for final demand services advanced 0.1%.
"Prices for final demand less foods, energy, and trade services moved up 0.2% in July following a 0.3% rise in June. For the 12 months ended in July, the index for final demand less foods, energy, and trade services increased 5.8%."
Oil prices internationally and domestically have continued to sell below $100 per barrel since mid-July, helping to ease prices. Domestic benchmark West Texas Intermediate traded at $94.60 on Thursday while the international benchmark Brent crude hovered at $99.90.
"Cooling prices paid by producers portend a further cooling for consumer prices, as producer prices are further up the inflation pipelines," said Jeffrey Roach, chief economist at LPL Financial, according to CNBC.
"We expect producer prices to ease as supply chains improve. It could take up to three months for improved supply chains to affect prices for the end consumer."
The index for final demand goods fell 1.8% in July, the largest decline since a 2.7% drop in April 2020. The July decrease can be traced to a 9.0% decrease in prices for final demand energy.
The final demand services index increased 0.1% in July, led by trade services, which rose 0.3%.