June PPI Drops to 5.5%, Beating Estimates as Energy Craters
Wholesale inflation undershot forecasts sharply in June. Energy led the decline, but pipeline pressure from metals and electronics is far from over.
June PPI came in at 5.5% year-over-year — well below the 6.2% consensus and down from 6.5% the prior month. Month-over-month, final demand actually went negative at -0.3%, smashing the +0.1% estimate. One day after CPI surprised to the downside, this report validates that read. The inflation story is cooling — on the surface.
Energy did the heavy lifting here. Gasoline fell 12% at the wholesale level, diesel cratered 18%, and final demand energy was off 6.4% for the month. That war-risk premium is bleeding out fast, and headline PPI going negative is legitimately good news for anyone betting on rate cuts. Don't pop the champagne yet, though.
Read more Canada June CPI Cools to 2.8%, Beating Estimates on Gas Relief →
Strip out the energy noise and the pipeline is still running hot. Core PPI ex-food and energy clocked 4.7% year-over-year. Processed intermediate goods are up 11.1% over the past year, unprocessed inputs up 13%. Steel mill products rose 3.6% in June alone. Aluminum mill shapes are up 52% year-over-year. Electronic components — think GPUs and memory chips riding the AI boom — jumped 27.6% annually. That's the AI-and-tariff cocktail still percolating deep in the supply chain, and in a solid economy, producers pass those costs on rather than eat them.
The big picture tension: PPI is running at 5.5% while CPI sits at 3.5%. That wedge matters. It means producers are absorbing some heat right now, but margin pressure has limits. Watch what happens when energy stabilizes or reverses — that downstream pass-through risk doesn't disappear, it just gets delayed. PCE watchers should dig into the June components that feed directly into that calculation before getting too comfortable with the soft-landing narrative.
Continue reading at Forexlive.
