Producer prices were relatively well behaved in July although upward revisions to June still made for slightly stronger than expected yearly inflation rates.
Factory gate prices were only flat on the month which saw their annual change drop 0.2 percentage points to 3.1 percent. This was the first decline in the 12-month rate since March. Monthly changes amongst the main components were generally small although petroleum products (minus 0.6 percent) and transport equipment (0.3 percent) bucked the trend. Core prices were also unchanged versus June but, at 2.2 percent, underlying annual inflation eased from a higher revised 2.4 percent to 2.2 percent.
Meantime raw material and import costs climbed a monthly 0.5 percent. This put their yearly rate at 10.9 percent, up from 10.3 percent and a 14-month high. This was the fifth consecutive increase. Crude oil (1.3 percent) saw the steepest monthly rise but sterling weakness was reflected in sizeable gains in most import categories, notably chemicals (0.7 percent), parts and equipment (0.7 percent) and other materials (0.8 percent).
The updated PPIs continue to signal a hefty squeeze on corporate profits but competitive factors look to be keeping a lid on factory gate prices. Currently, manufacturing does not pose a major threat to the CPI inflation target.