U.S. Producer Prices Fall 0.3% in June as Energy Costs Retreat

Wholesale inflation slowed more than expected last month, but renewed fighting with Iran and rising gasoline prices are clouding the outlook ahead of the Federal Reserve’s July policy meeting.

By yourNEWS Media Newsroom

U.S. producer prices unexpectedly declined in June as falling gasoline, diesel, jet fuel and crude petroleum costs outweighed an increase in service prices, according to government data released July 15.

The producer price index, which measures prices received by American businesses for goods and services, fell 0.3% last month, the Bureau of Labor Statistics reported. Economists had expected no change.

The decline followed a downwardly revised 0.6% increase in May.

Nearly all of the June decrease was attributed to a 1.4% drop in prices for goods, the largest monthly decline since July 2022. Lower prices for gasoline, diesel fuel, jet fuel and crude petroleum accounted for most of that reduction.

Prices for services moved in the opposite direction, rising 0.2% after falling 0.1% in May. Almost two-thirds of the increase was attributed to trade services.

On an annual basis, producer prices were 5.5% higher than in June 2025, a smaller increase than economists had anticipated.

Inflation has accelerated since the beginning of the war in Iran in late February, with much of the pressure concentrated in energy markets. Measures excluding energy have indicated that underlying inflation remained more restrained.

Core producer prices, which exclude the volatile food and energy categories, increased 0.2% in June. That was less than economists expected but higher than May’s downwardly revised 0.1% gain.

Core producer inflation rose 4.7% during the 12 months ending in June, also coming in below forecasts.

When food, energy and trade services were all excluded, producer prices were little changed during the month.

The wholesale inflation report followed consumer price data released one day earlier showing a significant easing in June, also driven in large part by greater stability in global energy markets.

The improvement may prove temporary, however, as oil and gasoline prices rise following renewed hostilities between the United States and Iran.

“The outlook for inflation in July is less promising. Gas prices have jumped since the re-escalation of the Iran conflict last week. [West Texas Intermediate] crude is back over $80 today for the first time in a month,” Bill Adams, chief U.S. economist at Fifth Third Commercial Bank, said in a note emailed to The Epoch Times.

As of July 15, the national average price for a gallon of gasoline stood at $3.89, nearly 10 cents higher than one week earlier.

The Cleveland Federal Reserve’s Inflation Nowcasting model nevertheless indicated that consumer prices could decline 0.1% during the month, while the annual inflation rate could ease to 3.3%.

The forecast remains uncertain because energy markets are responding to a new round of U.S. military operations against Iran and continued threats to commercial shipping through the Strait of Hormuz.

U.S. Central Command confirmed that American forces launched fresh strikes early July 15.

“The strikes are designed to further degrade military capabilities Iranian forces have used to attack commercial shipping in the Strait of Hormuz,” CENTCOM said on X.

President Donald Trump has warned that the military campaign will intensify unless Iran enters peace negotiations.

During a July 14 interview with Fox News, Trump suggested that renewed escalation was more likely than a return to the ceasefire reached in June.

“We’re going to hit them very hard tonight,” Trump said. “We’re going to hit them hard tomorrow night. We’re going to hit them really hard the night after.”

Further increases in crude oil and gasoline prices could reverse some of the improvement recorded in June and feed into transportation, manufacturing and consumer costs.

The changing inflation picture has also prompted investors to revise their expectations for Federal Reserve policy.

CME FedWatch data indicated that traders had shifted their forecast for the next interest-rate increase to October. September had previously been considered the most likely month for a rate hike.

“The Fed will need to see more cool inflation reports to hold off from raising rates in the second half of the year,” Adams said. “June’s CPI report is a big step in the right direction, but more is needed.”

Federal Reserve officials have also cautioned that one or two favorable reports may not be sufficient to demonstrate that inflation is moving sustainably lower.

Fed Gov. Christopher Waller said in a July 13 speech that he would need to see several additional reports showing cooling inflation before withdrawing his support for higher interest rates.

“When inflation is well above its target and the labor market is near full employment and stable, any serious policy rule calls for raising the policy rate to bring down inflation,” Waller said.

“Sternly staring at inflation until it melts before our withering gaze is not an option.”

Federal Reserve Chairman Kevin Warsh offered no clear indication of the central bank’s next policy move during an appearance before lawmakers on Capitol Hill on July 14.

Warsh did, however, pledge that the central bank would bring the recent inflation surge under control.

“The Fed’s number one objective is to get monetary policy right—or as near to it as we possibly can,” Warsh said in his opening statement. “That is our clear and constant aim, the star we steer by.”

“And if we get policy right—and we will—the inflation surge of the last five years will be a thing of the past.”

The Federal Open Market Committee is scheduled to hold its next two-day policy meeting July 28 and 29.

Officials will weigh June’s cooler producer and consumer inflation readings against the renewed surge in energy prices, continued strength in the labor market and the economic consequences of the expanding conflict with Iran.

The June PPI report gives policymakers evidence that underlying price pressures may be moderating. The trajectory for July and the remainder of the year, however, may depend heavily on whether oil markets stabilize or continue rising as military operations around the Strait of Hormuz intensify.