By Lucia Mutikani
WASHINGTON, July 15 (Reuters) – U.S. producer prices unexpectedly fell in June, posting their biggest decline in 14 months amid a pullback in the cost of energy products, further evidence that inflation was subsiding before the recent escalation in the Middle East conflict.
The report from the Labor Department on Wednesday also showed a sharp downward revision to the Producer Price Index data for May, and followed news on Tuesday of a larger-than-expected drop in the monthly Consumer Price Index last month.
The data, together with a slowdown in job growth in June, effectively ruled out an interest rate increase from the Federal Reserve this month. The reports have, however, been overtaken by the renewed hostilities between the United States and Iran following last week’s collapse of a fragile ceasefire.
Oil prices have climbed to a one-month high after Washington reimposed a naval blockade of Iran.
The PPI report also showed further price gains related to the artificial intelligence build-out, a concern for officials at the U.S. central bank. These factors keep a rate hike this year on the table, economists said.
“There’s no near-term pressure on the Fed, but oil is in the driver’s seat over the longer term,” said David Russell, global head of market strategy at TradeStation. “Energy saved the day in June, but that might become ancient history if the Strait of Hormuz doesn’t open soon.”
The Producer Price Index for final demand dropped 0.3% last month, the biggest decline since April 2025, after a downwardly revised 0.6% increase in May, the Labor Department’s Bureau of Labor Statistics said. Economists polled by Reuters had forecast the PPI unchanged after a previously reported 1.1% gain in May.
The BLS said PPI data from February through May had been revised to reflect the “availability of late reports and corrections by respondents.” In the 12 months through June, the PPI increased 5.5% after rising 6.0% in May. A narrower measure of the PPI, which excludes food, energy and trade, edged up 0.1% over the month and advanced 5.1% on a year-on-year basis.
A 1.4% decline in goods prices, the largest since July 2022, accounted for the decrease in the PPI over the month. Goods prices increased 2.3% in May. They were in June weighed down by a 6.4% drop in the cost of energy products, which followed an 8.4% jump in May. Gasoline prices tumbled 12%, accounting for nearly two-thirds of the drop in goods prices.
The cost of natural gas decreased 6.4%, but residential electricity prices rose 0.7%. There were also decreases in the prices of crude petroleum as well as thermoplastic resins and materials. The truce between the U.S. and Iran was shattered after commercial tankers came under fire in the Strait of Hormuz, a vital route for global oil supplies, that has become one of the main battlegrounds of the conflict.