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The overall producer price index (PPI) fell 0.9% in July, while the core index rose 0.2%.
The drop in the headline figure was larger than expected, and was due to a hefty 5.8% drag from energy and a 0.6% decline in food prices. The energy aggregate weakness was driven by a 17.7% drop in gasoline prices, which marks the largest one-month decline in more than 15 years. The decline in food prices was led by a 13.6% drop in the prices for fresh fruits and melons.
As for the core index, core consumer good prices rose only 0.1%, while capital equipment prices increased 0.2%. A 2.3% gain in the price of light trucks lead both indexes higher. Note that the overall and core indexes for both intermediate and crude goods revealed large declines.
Overall, the huge drop in the headline data suggest that inflation concerns will not be an issue at the August 21 FOMC meeting. In addition, the data suggest that the hefty pullback in energy prices should provide some near-term relief for non-energy businesses on the cost front, and this should allow more consumer spending to go to "real" consumption following the hefty "energy tax" earlier in the year. From Standard & Poor's Global Markets