US: Weak producer prices – Nomura

US headline PPI declined slightly by 0.1% m-o-m in July, lower than the consensus forecast of +0.1% m-o-m, notes the analysis team at Nomura.

Key Quotes

“Trade prices, which measure changes in margins received by wholesalers and retailers, dropped sharply by 0.5%, led by a 5.8% decline in margins for chemicals and allied products wholesaling. Excluding volatile components of food (+0.0%), energy (-0.3%) and trade, core PPI remained flat in July. Even after stripping out volatile prices, there is no signal of inflationary pressure.”

“While some relevant elements of PPI data such as food and electricity prices came in below our assumptions, that negative surprise was not big enough to change our forecast for today's CPI. We stick to our call laid out in the July CPI Preview published.”

“With respect to core PCE prices, among relevant elements of PPI, financial service prices such as portfolio management and securities brokerage services declined in July. However, some medical care service prices like hospital outpatient and inpatient services both showed decent increases of +0.6% and 0.3%, respectively. Overall, PPI's prices which are used for estimating core PCE price index seem to push up core PCE inflation slightly in July.”