U.S. producer prices unchanged in July

[August 09, 2018]  WASHINGTON (Reuters) - U.S. producer prices were unchanged in July for the first time in seven months as a modest increase in the cost of goods was offset by a drop in services, but underlying producer inflation continued to push higher.

The Labor Department said on Thursday the unchanged reading in its producer price index for final demand followed a 0.3 percent increase in June. In the 12 months through July, the PPI advanced 3.3 percent, slowing after June's 3.4 percent increase.

Economists polled by Reuters had forecast the PPI increasing 0.2 percent in July and rising 3.4 percent year-on-year.

A key gauge of underlying producer price pressures that excludes food, energy and trade services rose 0.3 percent last month. The so-called core PPI rose by the same margin in June.

In the 12 months through July, the core PPI increased 2.8 percent after rising 2.7 percent in June.

Last month's weak PPI reading is likely temporary against the backdrop of a strong labor market and robust economy. The Trump administration's import tariffs on lumber, steel and aluminum, as well as a range of Chinese goods, are also expected to boost price pressures.

The Federal Reserve's preferred inflation measure, the personal consumption expenditures (PCE) price index excluding food and energy, increased 1.9 percent in June. The PCE price index hit the U.S. central bank's 2 percent inflation target in March for the first time since December 2011.

In July, prices for goods edged up 0.1 percent after a similar gain in June. Goods prices were lifted by a 0.7 percent increase in the cost of pharmaceutical preparations. There were also increases in the prices of motor vehicles and liquefied petroleum gas, but the cost of electricity fell 1.6 percent.

There were also decreases in the prices of meat, oilseeds and nonferrous scrap.

The cost of services dipped 0.1 percent, the biggest drop in seven months, after increasing 0.4 percent in June. A 12.7 percent drop in the index for fuels and lubricants retailing led the decline in the cost of services last month.

The cost of healthcare services edged up 0.1 percent as a 0.4 percent drop in prices for hospital outpatient care was offset by increases in hospital inpatient care. Healthcare prices gained 0.2 percent in June.

Those costs feed into the core PCE price index.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)

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