PPI: -6.8% YOY Through July, Core PPI +2.6% YOY. Inflation Fear Subsides.

The US Producer Price Index, which measures inflation at the business and manufacturing levels of the economy, was -0.9% in July and -6.8% year-over-year through July. Excluding volatile oil and food costs from the readings, “Core” PPI for July was -0.1% and +2.6% YOY through July. You can also view and download historical PPI data by scrolling down to our Data section on the right side of the site.

Back in February, inflation wasn’t a concern and deflation was the primary worry. And in the last four months, it’s been a see-saw: Inflation fear in April, Inflation benign in May, fear in June, and now benign in July. The -6.8% YOY figure is the largest YOY drop ever. On surface level, market sentiment seems to be that inflation shouldn’t be an issue for some time because aggregate demand is compromised by weakened consumers and businesses. But bond still trade wildly as we see-saw back and forth on these two sentiments. It’s justifiably hard to reconcile when Core YOY PPI is +2.6% which is higher than the Fed’s 1-2% comfort zone. Today bonds rallied and rates dropped.