[Click eStock] "US Inflation Indicator, Signal of Easing Recession Concerns"

IM Securities analyzed on the 14th that the July U.S. Producer Price Index (PPI) increase fell short of market expectations, reaffirming the trend of slowing inflation.

The U.S. PPI for July rose by 0.1% month-over-month, below both June's 0.2% increase and the market forecast of 0.2%. The year-over-year increase slowed to 2.2%, down 0.5 percentage points from June's 2.7%.

Park Sang-hyun, a researcher at IM Securities, stated, "Through the July PPI, we confirmed that the upward trend has eased," adding, "After the PPI rose again since the beginning of the year, heightening inflation concerns, this can be interpreted as a signal that inflationary pressures have eased."

He continued, "The slowdown in the July PPI increase was driven by a decline in service prices," noting, "The increase rate for Final Demand goods rose 0.6% month-over-month due to gasoline price increases, but Final Demand services fell 0.2% month-over-month."

He analyzed, "For the first time in seven months since December last year, the service price increase rate declined month-over-month," and added, "Considering that U.S. inflationary pressures have mainly appeared in the service sector, the decline in service prices is a positive signal for price stability."

Researcher Park explained, "The 3-year expected inflation rate among July's expected inflation rates is 2.3%," noting, "This is the lowest level since statistics began being compiled in June 2013." He emphasized, "While we need to observe the July Consumer Price Index (CPI) data further, the July PPI and expected inflation rates are indicators that strongly support a rate cut in September."

Furthermore, he expressed hope, saying, "It is uncertain whether the U.S. Federal Reserve (Fed) will implement a big cut (0.50 percentage point rate cut)," but added, "if strong stability in inflation indicators is confirmed rather than concerns about a recession, the possibility of a big cut cannot be ruled out."