How would you interpret a sharp decline in the producer price index?
WASHINGTON (Reuters) – U.S. producer prices unexpectedly fell in July, recording their biggest drop in nearly a year and pointing to a further moderation in inflation that could delay a Federal Reserve interest rate increase.
Other data on Thursday showed an increase in the number of Americans filing for unemployment benefits last week. The trend in weekly jobless claims, however, remained consistent with a tightening labor market.
The Labor Department said on Thursday its producer price index for final demand slipped 0.1 percent last month, weighed down by decreasing costs for services and energy products.
That was the largest decline since August 2016 and reversed June’s 0.1 percent gain. In the 12 months through July the PPI increased 1.9 percent after rising 2.0 percent in the year through June. Economists had forecast the PPI ticking up 0.1 percent last month and climbing 2.2 percent from a year ago.
Barring the possibility that it’s just a fluke, it seems to me that it suggests deflation. It also makes me wonder if China’s economic problems aren’t worse than the Chinese authorities might want us to believe.