Inflation at the Producer Level in July – Slowed by Food and Gas

The Bureau of Labor Statistics (BLS) released the Producer Price Indexes (PPI) for July. Inflation in prices received by producers (prior to sales to consumers) rose 0.1% in July from June (a 1.1% annual pace). Excluding the volatile categories of food and energy, core prices increased 0.2% (a 2.2% annual pace). Over the 12 months ending in July prices and core prices have increased 1.7% and 1.6%, respectively. These rates represent a deceleration from earlier in the year when food and energy prices drove rates higher. In July a moderation in food prices and a decline in gas prices slowed overall inflation.

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Among building materials, softwood lumber prices have moved up and down over the last 18 months. Prices in July declined from June and are below prevailing levels in 2014 so far. However, current prices remain above levels from late 2013 but below levels earlier in 2013. Demand from China and rising global exports have kept recent prices elevated.

OSB prices dipped in July from June but have largely maintained their sideways movement since the second half of 2013. Added capacity since early 2013 combined with a softer than expected US housing market in 2014 have kept price pressures in check.

Gypsum prices were flat in July from June after declines earlier in the year and a May increase. Prices are below 2014 highs but remain above their 2006 housing boom peak.

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