Producer Prices Fall 0.9% in July

The prices paid to U.S. factories, farmers and other producers tumbled 0.9% in July, in the largest single month drop since 1993, the Labor Department said on Friday.

The drop in the producer price index, which measures inflation pressures before they reach retail store shelves, was more than double what market watchers had been predicting, according to Bloomberg.

A falling PPI shows weak demand for goods, which would mean fewer shipments for trucking companies.

However, the fact that there is little evidence of inflation will make it easier for the Federal Reserve to cut interest rates later this month in an effort to spur the economy. The Fed is expected to cut rates for a seventh time this year on Aug. 21, according to Bloomberg.

The fall in PPI follows a 0.4% decline in June, the first time the producer price index has fallen two months in a row since last year. It was fueled by declines in the cost of gasoline, computers and cars according to government statistics.

The “core” PPI rose 0.2% for the month. This takes into account all goods with the exception of food and energy. Food and energy prices are volatile and mask trends in the underlying inflation rate.