According to the Zhì Tōng Cái Jīng report, the June PPI increase in the US slightly exceeded expectations. This was due to an increase in service providers' profit margins, which offset the impact of continuous declines in commodity costs over the second consecutive month. Data released by the US Bureau of Labor Statistics on Friday showed that June PPI rose 2.6% year-on-year, the highest since March 2023, with an expected value of 2.3% and a previous value of 2.2%. June PPI rose 0.2% month-on-month, with an expected value of 0.1% and a previous value of -0.2%.

The PPI report shows that service costs rose by 0.6%, with almost all of the increase related to a 1.9% increase in wholesalers' and retailers' profit margins. At the same time, last month's PPI data was significantly revised upwards. May PPI year-on-year and month-on-month growth rates were both revised upwards by 0.2 percentage points, and core PPI year-on-year and month-on-month growth rates were both revised upwards by 0.3 percentage points.

However, commodity costs have fallen. The end-product demand index fell by 0.5%. The cost of intermediate demand processed goods fell by 0.2%, which is the third consecutive decline in the past four months.

The PPI report on categories used to calculate the inflation gauge preferred by the Federal Reserve (PCE price index) was mixed. Airfare prices rose by 1.1%, and investment portfolio management service prices rose by 1%. Price growth in healthcare related industries was relatively moderate. Healthcare costs rose by 0.2%, and outpatient costs for hospitals rose by 0.1%. The June PCE price index will be released later this month.

Before the release of the PPI report, the US CPI fell 0.1% month-on-month on Thursday, the first decline since the outbreak of the pandemic. Core CPI rose 0.1% month-on-month in June, the smallest increase since August 2021, with a market expected increase of 0.2%. Following the CPI report, expectations for the Fed to begin cutting interest rates in September received a boost.

After the unexpected rise in PPI, analysts believe that the slight optimism brought by the CPI data may be dampened as both overall PPI and PPI excluding food and energy rose more than expected, despite the large upward revision to previous PPI data, making the error in the year-on-year indicator even greater. Statisticians need to carefully study the details and sort out the components of PCE inflation. However, at first glance, the change in PCE, as the Fed's preferred inflation gauge, will not be as friendly as implied by yesterday's CPI data.

Nevertheless, the inflation gauge excluding food, energy, and trade, which has a smaller volatility, remained unchanged. Compared with a year ago, the indicator slowed to 3.1%. In a report, Paul Ashworth, chief North American analyst at Capital Economics, said, "The sub-item data used to calculate PCE in June PPI was significantly lower than expected, suggesting that the May PCE increase may also be revised downwards, although by a small margin."

After the PPI data was released, US bond yields rose on Friday, but overall expectations for the Fed to cut interest rates in its September meeting did not change. The yield on 10-year US Treasury bonds rose 3.5 basis points to 4.227%, up from 4.204% before the data was released. After the data release, the yield on two-year US Treasury bonds rose slightly to 4.510%, up from 4.495% before the report was published. Spot gold fell 7 dollars in the short term, bottoming out at 2396.09 US dollars/ounce. The US dollar index DXY rose 14 points in the short term, now trading at 104.38.