Producer prices held up a little better than expected in June. However, even an unchanged reading on the month was soft enough to reduce annual PPI inflation by 0.4 percentage points to 2.4 percent, equalling its lowest mark since December. The headline index has now only risen once in the last four months.
Unusually, energy, where prices were also flat on the month, had no significant impact as the core PPI was similarly steady at its May level. This made for a 2.5 percent yearly increase, a couple of ticks down on its mid-quarter outturn. Elsewhere, capital goods showed no monthly change while a 0.2 percent fall in intermediates was offset by a 0.4 percent increase in consumer goods.
Underlying producer prices are now rising at their slowest rate since February, a deceleration that may well reflect some second-round effects from the decline in energy costs. In any event, the latest developments will not be wasted on the ECB which will probably see today's data as further reason for adjusting policy only very cautiously in the future.