US PPI Surprises with Greater Deceleration Than Expected
The US Producer Price Index (PPI) decelerated more than expected in July, easing to 4.7% from 5.5% in June. This marks a significant slowdown in producer price growth, which is closely watched by economists as it can influence consumer prices and ultimately inform monetary policy decisions.
The PPI report showed that energy prices contracted on a monthly basis, while transportation and warehousing services also saw a decline. However, construction prices rose and portfolio management costs accelerated. The numbers exceeded market expectations, with analysts predicting a 4.9% rate in July.
Following the release of the PPI data, the CME FedWatch Tool reflected a decrease in the probability of a 25 basis point interest rate hike at the Federal Reserve's September meeting to 35%. Meanwhile, the probability of keeping rates unchanged rose to 65%, indicating that markets expect a more neutral monetary policy stance.
The S&P 500 Index advanced by 0.65% to a new record high of 7,798, while the Nasdaq 100 and Dow Jones Industrial Average also saw gains.