
US producer prices rise modest 2.6% in May with inflationary pressures still mild
The Labor Department reported Thursday that its producer price index — which measures inflation before it its consumers — rose 2.6% in May 2024. Producer prices rose 0.1% from April to May after dropping 0.2% the month before.
Excluding volatile food and energy prices, wholesale costs were up 0.1% from April and 3% from May 2024.
The readings were slightly lower than economists had forecast.
The report came out a day after the Labor Department said that consumer prices rose a modest 0.1% last month from April and 2.4% from a year earlier.
Since returning to the office, Trump has rolled out 10% tariffs on nearly every country in the world as well as specific levies on steel, aluminum and autos. Importers in the United States pay the taxes and pass them along to consumers via higher prices when they can. For that reason, economists expect inflation to pick up later this year.
So far, his tariffs don't seem to have had much of an impact on prices overall.
Wholesale prices can offer an early look at where consumer inflation might be headed. Economists also watch it because some of its components, notably health care and financial services, flow into the Federal Reserve's preferred inflation gauge — the personal consumption expenditures, or PCE, index.
Inflation began to flare up for the first time in decades in 2021, as the economy roared back with unexpected strength from COVID-19 lockdowns. That prompted the Fed to raise its benchmark interest rate 11 times in 2022 and 2023. The higher borrowing costs helped bring inflation down from the peaks it reached in 2022, and last year the Fed felt comfortable enough with the progress to cut rates three times.
But it has turned cautious this year while it waits to see the inflationary impact of Trump's trade policies. The central bank is expected to leave rates unchanged at its meeting next Tuesday and Wednesday.
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Reuters
19 minutes ago
- Reuters
EU Russia sanctions add fuel to red-hot global diesel market
LONDON, July 28 (Reuters) - New European Union sanctions targeting Russia's oil industry will reshuffle global diesel flows for the second time since 2022, adding pressure to an already red-hot market. Diesel prices have proven surprisingly resilient so far this year. U.S. President Donald Trump's sweeping tariff announcement in April sparked concerns that global economic and trade activity was about to decelerate sharply. But these fears failed to materialize after Trump rowed back many of these threats and engaged in trade negotiations. The diesel market is seen as a proxy for global economic activity because the fuel is mostly used in trucks, ships and power generators as well as agricultural and industrial machinery. In Europe, around a quarter of the passenger car fleet runs on diesel, a significantly higher proportion than in other regions. U.S. diesel demand, based on a four-week average, has been nearly 5% higher so far in 2025 than a year ago at 3.8 million barrels per day, according to the Energy Information Administration. Meanwhile, India's diesel consumption in May climbed 2.1% from a year earlier and China's demand appeared to be strong in June, judging by high refinery crude processing. This is a far cry from the weak environment many imagined we might be seeing after Trump escalated his global trade war. One major support for refining margins in recent months has been low diesel stocks. Combined inventories of diesel in the United States, Europe and Singapore are around 20% below their 10-year average. Diesel stocks typically build during the northern hemisphere summer, when refinery output is at its highest. Beyond the mixed demand picture, there are a host of other reasons for the slow diesel inventory build. These include unplanned refinery outages, such as Israel's 197,000-barrels per day refinery in Haifa that was hit during the 12-day war with Iran in June, and the closure of the 113,000-bpd Lindsey refinery in northeast England following its owner's bankruptcy. The global shortage in heavy and medium crude oil grades, which have higher diesel yields, has further limited refining output. The shortage is the result of U.S. sanctions on Venezuelan crude exports, a drop in Canadian output due to wildfires and lower exports of those grades by OPEC members. The outlook for diesel was further complicated last week after the EU adopted its 18th package of sanctions against Russia over its war in Ukraine. The measures, aimed at limiting Moscow's revenue from oil exports, included an import ban on refined products made from Russian crude. The ban, which would likely kick in next year, seeks to close a loophole that Russia has been exploiting since the EU halted most imports of the country's crude and refined products in the wake of Moscow's invasion of Ukraine in February 2022. Russia accounted for 40% of Europe's diesel imports in 2021, representing nearly a quarter of the region's total consumption. To address the shortfall following the 2022 ban, Europe increased diesel imports from China, India and Turkey. At the same time, those three countries sharply increased imports of cheap Russian crude oil, which meant Europe was effectively buying products made from Russian feedstock. Indian refiners, which accounted for 16% of Europe's imports of diesel and jet fuel last year, are set to be particularly hard hit by the latest ban, as 38% of India's crude imports in 2024 were from Russia, according to Kpler data. The ban would likely have a smaller impact on imports by Turkey, where Russian crude tends to be used by refineries that supply the domestic market. Plants that export fuel to Europe tend to process non-Russian crude. The main winners will likely be Gulf states. The new EU ban exempts countries that are net exporters of crude, even if they import Russian oil. This would allow refineries in Saudi Arabia, the United Arab Emirates and Kuwait to increase exports to Europe, taking market share from Indian competitors. The most likely outcome from these new sanctions, whose details have yet to be specified, is a reorganization of global diesel shipping flows. Indian refiners, including the giant 1.2 million Reliance refining complex in Jamnagar, will need to find new outlets for their fuels. This will likely include markets in Africa, where Indian operators would be competing for market share with Nigeria's newly-built 650,000-bpd Dangote refinery, the continent's largest. At the same time, Middle Eastern refiners will direct more diesel towards Europe and less fuel towards closer Asian markets. This, in turn, will likely lead to higher freight costs – and that could ultimately push up prices at the pump in Europe. This situation would get even more complicated if President Trump follows through on the threat to hit countries that buy Russian oil with a 100% tariff if Moscow doesn't agree to stop the fighting in Ukraine by September. This all means that even if oil demand begins to falter, the combination of low global diesel inventories and tightening sanctions on Russia will likely support diesel prices and refining margins in the months ahead. Enjoying this column? Check out Reuters Open Interest (ROI),, opens new tabyour essential new source for global financial commentary. ROI delivers thought-provoking, data-driven analysis. Markets are moving faster than ever. ROI, opens new tab can help you keep up. 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Reuters
19 minutes ago
- Reuters
Fed rates are going nowhere fast
LONDON, July 28 (Reuters) - Incoming U.S. inflation signals are offering the Federal Reserve little or no justification to resume interest rate cuts, and it's hard to see that changing before September. Following an unscheduled visit to the Fed last week, President Donald Trump said he thinks the Fed may be ready to lower rates again. To be sure, at least two of his appointees to the Fed board - Christopher Waller and Michelle Bowman - have indicated they might vote for a cut as soon as this week. But they may be alone. Markets certainly remain unconvinced. Futures pricing shows virtually zero chance of a move on Wednesday and only a 70% chance of a cut at the following meeting in September. Markets now even doubt we'll see two rate cuts this year - the median of Fed policymakers' forecasts published just last month. While some clarity on the uncertain trade picture should emerge from this Friday's deadline, the effective overall import tariff rate is still set to be almost 20% higher than at the start of the year. And the impact from that may take months yet to filter through. But there are enough other signals that higher import levies and a weaker dollar are already irking the U.S. price picture, at least enough to keep the Fed wary. As it stands, inflation remains well above the 2% target, and long-term market inflation expectations, now the highest of any G7 country, are above target too and creeping up. The Fed's favored inflation gauge, from the personal consumption expenditures basket, is due for release on Friday, and the annual core rate excluding food and energy is expected to be 2.7% - the same as last month. Consumer price inflation data for the month that has already been released shows pockets of price pressure in key areas affected by the limited tariffs enacted so far. Producer price data was more subdued, but that series doesn't include imported goods. Moreover, manufacturing firms last week continued to show outsized gains in input prices in July. S&P Global's monthly survey of purchasing managers registered an input price reading of 64.6, still far above the 50 threshold between expansion and contraction. Unlike the PPI, that captures imported inputs. By contrast, European manufacturers registered an equivalent input price reading of 49.9. Tariff-related readouts from the roughly one-fifth of S&P 500 companies that have reported second-quarter updates have been noisier. But economists warn that two aspects of the earnings season could potentially be disguising the tariff impact. The first is significant front-loading of imports in the first quarter to beat the tariffs, the enormous scale of which led to a small GDP contraction in the first three months of 2025. As that tariff-free inventory is run down, costs should rise as tariffs begin to hit. The hiatus may have allowed many firms to keep prices steady or avoid taking significant margin hits through the second quarter. The second aspect economists warn about is the degree to which major companies may want to avoid any public statements on negative tariff hits or any pass-through to consumers due to fears of political backlash. All of which leaves a foggy inflation picture going forward and one unlikely to be clarified much by September. To be sure, the Fed has a dual mandate, which includes both keeping prices stable and maintaining maximum employment, and one argument, from Waller at least, is that the labor market is showing signs of softening. And yet employment reports out this week are unlikely to offer much support on that front either, with recent weekly jobless claims data painting a robust picture. While monthly payroll growth is expected to slow in July, the unemployment rate is set to remain near historic lows at about 4.2%, with annual wage growth one percentage point above core PCE inflation. What's more, second-quarter U.S. GDP updates this week are also expected to confirm a brisk bounce-back in overall economic growth to 2.4% after the trade-distorted first-quarter hiccup. Lazard chief market strategist Ron Temple reckons the Fed won't cut at all this year, just like seven Fed policymakers indicated last month. "My logic is that inflation is likely to re-accelerate meaningfully by year-end due to tariffs," he wrote on Friday. "Thereafter, stricter immigration enforcement is likely to create another inflationary force," he said, adding that rising deportations of workers could push up wage inflation, keep unemployment stable, and cause GDP to slow. "That is not a scenario that argues for Fed rate cuts." If the Fed does signal it's ready to ease again, it may struggle to make a cogent case for why it is doing so. The opinions expressed here are those of the author, a columnist for Reuters -- Enjoying this column? Check out Reuters Open Interest (ROI), your essential new source for global financial commentary. Follow ROI on LinkedIn. Plus, sign up for my weekday newsletter, Morning Bid U.S.


BreakingNews.ie
19 minutes ago
- BreakingNews.ie
Trump and von der Leyen agree EU-US deal on US President's Scotland visit
Donald Trump said the US and EU had agreed the 'biggest deal ever made' after a high-stakes meeting with Ursula von der Leyen on the second full day of his private visit to Scotland. The EU is set to face 15 per cent tariffs on most of its goods including cars, semiconductors and pharmaceuticals entering America rather than a 30 per cent levy previously threatened by the US President. Advertisement President of the EU Commission Ms von der Leyen said the agreement would provide 'certainty in uncertain times' for citizens and businesses, while Mr Trump hailed what he described as the 'biggest deal ever made'. The agreement will include 'zero for zero' tariffs on a number of products including aircraft, some agricultural goods and certain chemicals, as well as EU purchases of US energy worth 750 billion dollars (€638 billion) over three years. The two leaders met at the US President's Turnberry golf resort in Ayrshire on Sunday to hammer out the broad terms of the agreement, the detail of which is due to be fleshed out in the coming weeks. Before their bilateral talks, which lasted around an hour, Mr Trump had said there was a '50-50' chance of the deal being reached as a number of the sticking points remained. Advertisement Following the meeting, he said: 'I think it's great that we made a deal today instead of playing games and maybe not making a deal at all … I think it's the biggest deal ever made.' Ms von der Leyen said: 'Today's deal creates certainty in uncertain times, it delivers stability and predictability for citizens on both sides of the Atlantic.' Speaking to journalists afterwards, she acknowledged there was 'tension' at the beginning of her meeting with the US President but said 'in the end, as we were successful, it's good and it's satisfactory.' Taoiseach Micheál Martin welcomed the 'clarity' the agreement brought to the transatlantic trade relationship and said the implications for exports from Ireland would be studied in the coming days. Advertisement Together, the EU and the US are a market of 800 million people. And nearly 44 percent of global GDP. It's the biggest trade deal ever ↓ — Ursula von der Leyen (@vonderleyen) July 27, 2025 'That is good for businesses, investors and consumers. It will help protect many jobs in Ireland,' he said. 'The negotiations to get us to this point have been long and complex, and I would like to thank both teams for their patient work. 'We will now study the detail of what has been agreed, including its implications for businesses exporting from Ireland to the US, and for different sectors operating here.' The agreement reached on Sunday evening looks to have averted the prospect of transatlantic trade war amid concerns that US tariff rates could damage the world economy. Advertisement However, uncertainty remains over American levies on steel, which Mr Trump has suggested remains subject to a global rate of 50 per cent. Ireland Taoiseach welcomes trade deal between EU and US Read More Ms von der Leyen said the steel sector would go back to 'historical quotas' like in the UK-US deal, with 'ring-fencing' to deal with global overcapacity. British Prime Minister Keir Starmer will meet the US President for bilateral talks at Turnberry on Monday, with Britain's trade agreement with Washington expected to be a key focus. The pact signed at the G7 summit last month left tariffs on UK steel at 25 per cent rather than falling to zero as originally agreed. Advertisement