U.S. PPI -0.3% in June; gasoline -12% cools wholesale inflation

U.S. final-demand PPI fell 0.3% in June, reversing a 0.6% May increase and giving rates markets a fresh inflation input before the July 29 Fed decision. The Bureau of Labor Statistics release put the 12-month increase at 5.5%, with the monthly decline driven by goods rather than services.

The goods-services split matters for bond investors. Final-demand goods prices fell 1.4%, the largest decline since July 2022, while final-demand services rose 0.2%. BLS said final-demand energy dropped 6.4% and final-demand foods fell 0.6%, while goods excluding food and energy increased 0.2%. The release also said the index excluding food, energy and trade services rose 0.1% in June after a 0.8% May increase.

The clearest catalyst was gasoline. BLS traced nearly two-thirds of the June decline in final-demand goods to a 12.0% drop in gasoline prices. Diesel fuel, jet fuel, fresh vegetables, crude petroleum and thermoplastic resins also declined. On the services side, trade margins rose 0.4%, and securities brokerage, dealing and investment advice was among the categories that increased.

For markets, the release qualifies as a macro surprise because the headline moved from a 0.6% May increase to a 0.3% June decline while the 12-month rate remained elevated at 5.5%. The mix is not a clean disinflation signal: goods and energy cooled sharply, but services prices still rose. That combination limits the case for reading the report as a broad demand slowdown.

The next checks are CPI revisions, oil prices after renewed Middle East tension, and the July FOMC meeting. If gasoline rebounds, the June PPI relief could reverse quickly in July producer prices. If core categories stay near 0.1%-0.2%, Treasury yields and Fed-funds futures will have a firmer basis for pricing a slower inflation path.