June’s producer price index records a 0.1% decrease in inflation.

Inflation Drops to 0.1% Annual Rate in June

Inflation, as measured by the producer price index (PPI), fell to a 0.1% annual rate in June, according to the Bureau of Economic Analysis. This decrease is a further indication that inflationary pressures are abating in response to the Federal Reserve’s efforts to slow down economywide spending by raising interest rates. The PPI’s headline number is now at its lowest level since September 2020.

Core Inflation Still Above Headline PPI Inflation

While headline PPI inflation has decreased, core inflation, which excludes volatile food, energy, and transportation prices, is still running above the headline rate. In June, core inflation stood at a 2.6% annual rate.

Inflation Drops to 3% in Major Boost for Biden and Bidenomics

Thursday’s PPI report follows the release of the consumer price index (CPI) for June, which is even more closely watched. The CPI inflation rate dropped to 3% annually, a significant decline from the previous month. This downward trend in the annual CPI inflation rate has been ongoing since its peak in June of last year and is now at its lowest level since March 2021, when inflationary concerns first emerged.

The Federal Reserve’s aggressive interest rate hikes have played a role in gradually cooling the country’s inflation. With the target rate now at 5% to 5.25%, the Fed paused its rate-hiking last month for the first time since the tightening cycle began. However, officials have indicated that this pause is expected to be temporary, with the possibility of two more rate revisions by the end of the year.

President Joe Biden has highlighted the recent declines in inflation as evidence that his “Bidenomics” agenda is working. However, Republican critics argue that Biden bears some responsibility for the initial surge in inflation due to significant federal spending at the beginning of his presidency.

Biden has also emphasized the strength of the labor market, which has defied expectations despite the Fed’s tightening measures. In June, the economy added 209,000 jobs, although this fell slightly below the forecasted expectations of 225,000. It was the first report in months to come in below the consensus prediction and the slowest pace of job growth since December 2020.

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