US Economics: PPI details benign for PCE inflation

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US Economics: PPI details benign for PCE inflation

US Economics

15 July 2026 Citi Research

Data – PPI final demand fell 0.3%MoM in June, softer than consensus expectations

and our forecast for a modest increase. Total PPI was also revised lower in May

from 1.1% to 0.6%. PPI excluding food and energy rose 0.2%MoM in June, while the

core measure that additionally excludes trade services rose 0.1%.

Based on details of PPI and CPI data, we expect a 0.18%MoM (0.177%) increase in

core PCE inflation in June. This would bring the year-on-year rate to 3.3% from

3.4%. Based on June data, we still expect annual core PCE inflation to be revised

~25bp lower in September annual revisions.

Citi’s view – Following a very soft June CPI reading yesterday, June PPI also

surprised lower, reflecting falling energy prices and benign non-energy details.

Most importantly, we lowered our tracking of June core PCE inflation from 0.21% to

0.18%MoM, implying a slight pullback in the year-on-year rate to a still-high 3.3%.

This would be the softest monthly increase in core PCE since March 2025 and

should be cool enough to take the potential for a July rate hike off the table. We

continue to expect further slowing in core inflation (especially CPI) over the

summer to price out the chance of hikes altogether, with softer labor market data

also starting to shift risks back toward cuts.

Details that matter for PCE inflation were mixed in June, but overall a bit softer

than we had penciled in. This was mostly due to a modest 0.5% increase in

portfolio management fees (we had penciled in 3%). Asset prices rose more over

April/May than portfolio management fees rose over May/June (fees follow asset

prices with a one-month lag). But as fees did not decline as much in April with the